Rising school fees hit demand for larger homes in UAE

The school fee effect is also spurring highly-paid parents to rent rather than buy.

[This article was originally published on Khaleej Times]

It’s around this time every year as schools close for the long summer holidays that scores of expat families pack up and leave the UAE permanently. The flow of new residents arriving and ex-residents departing is a constant of life in a country in which foreigners make up most of the workforce.

But check your Facebook feed and other social media and there appears to be anecdotal evidence to suggest the exodus of families is gathering pace and that there is usually one common factor mentioned in all those goodbye posts: the high cost of education.

Dubai’s private schools have received government permission to raise fees for 2017-18 by up to 4.8 per cent, Khaleej Times reported in February, with hikes dependent on school performance. The latest increases mean that fees could have risen by as much as 30 per cent since 2011-12, as per media reports.

Educational costs account for a big chunk of expat family incomes and the steady increases in fees have diminished the attractiveness of the UAE for foreign workers with children. In turn, that is dampening demand for property, particularly larger apartments and villas.

Unlike healthcare insurance, which is now mandatory for all employees, expat packages rarely include schooling allowances and full healthcare benefits for dependents. For workers from the likes of Europe and Australasia, where high-quality education and medical cover is free, the benefits of a tax-free salary may now fail to cover these extra costs incurred from living in the UAE, prompting some to consider returning home.

As well as hitting demand for larger properties, the school fee effect is also spurring highly-paid parents to rent rather than buy – it seems many are less willing to commit to the UAE for the long term, with school fees increasing as a child gets older.

While school fees appear to be rising ever upward, UAE residents have benefitted from a steady decline in rents from mid-to-late 2014, which should have eased the burden on families.

Developers have responded to demand from budget-conscious families seeking to rent or buy, with several affordable developments launched or handed over in the past couple of years. Damac’s Akoya, Emaar’s Reem and Dubai Properties’ Mudon, all located in Dubai’s periphery near the E611 road, have provided families with cheaper alternatives.

These developments usually include essential facilities such as primary schools, but often these open only after the project is well-established and most properties are occupied. For those families among the first to move in, the nearest school is a long car or bus ride away, while generally good schools can impact demand and prices for nearby property.

Even with the government linking fee rises to school performance, there is undoubtedly some scepticism among parents as to the quality and value for money that UAE schooling provides. While the top schools have excellent reputations, the fees are dizzying and some charge just for a child to be put on the waiting list for a place.

The UAE’s robust economy and the spending power of the dollar-pegged dirham should ensure it remains an attractive proposition for thousands of expat families, but the onerous cost of education is a problem that policy makers must tackle in the long term to ensure the country maintains its competitiveness in attracting global talent.

Read more about: ,