ABU DHABI SETS FLATS AND VILLAS CHARGE AT 5 PER CENT
▶ Estate agent says municipality fee will have knock-on effect on rents as villa residents escape 7.5% levy
The municipality fee for renting a villa or flat in Abu Dhabi has been set at 5 per cent.
The charge is an increase on the 3 per cent levy for flats and villas, but lower than the 7.5 per cent that was under consideration for villas in recent weeks.
Initially, the Abu Dhabi Distribution Company, which collects the fee, had outlined a revised charge of 5 per cent for flats and 7.5 per cent for villas.
The charge was introduced in February 2016 and set at 3 per cent of the value of a property’s annual rental contract.
Last month, the Executive Council approved a plan to increase the charge.
A municipality employee confirmed the increased charge and said the fee would be backdated to May.
Owners in particular will benefit, according to Ben Crompton, managing partner of estate agency Crompton Partners.
“People don’t really understand that these taxes are more likely to fall on the owners of the property in terms of rent reductions,” he said. “If there is going to be more tax on renting a villa, then villas will be harder to rent.
“I’m not an economist, but you would imagine that the rent would come down by the same amount that the fee is being charged at.”
He said it was good news for UAE nationals because they own the bulk of the villas in the city.
“Levelling them up with apartments makes sense and brings it into line with what the fee is in Dubai, which is 5 per cent on residential rents,” Mr Crompton said.
He said many people looking to move were worried about the increase.
It could have been because municipality costs are higher for villas as they require more landscaping, refuse collection, pavement and road maintenance, Mr Crompton said.
“It’s good news for tenants and landlords that they are now the same for apartments and villas,” he said. “Obviously, they would have preferred not to have the hike from 3 per cent to 5 per cent, but much better 5 per cent than 7.5 per cent.”
The latest charge represents a significant saving to tenants renting villas.
People renting a Dh200,000-ayear villa will now pay Dh833.33 a month at the new rate, as opposed to Dh1,250 a month at 7.5 per cent.
The charge is among a series of fees and taxes introduced in the UAE over the past year, including a 100 per tax on cigarettes, a 50 per cent charge on energy drinks and a 30 per cent tax on alcohol sold in offlicences in the capital.
In addition, a 5 per cent VAT charge has been applied on most daily goods and services since January 1.
However, rents are continuing to fall across the capital, after dropping by up to 10 per cent last year. Market experts predict that the rate will slow as oil prices stabilise and government spending increases.
Emiratis, homeowners and government employees whose rent is paid by the department or agency for which they work, are exempt from paying the municipality fee.
Rents across the capital have fallen in the past year but that may slow as measures to stablise oil prices take effect