Apartment owners face huge bills for upkeep of their blocks

DUBAI-Hundreds of apartment buildings in Dubai are facing a shortage of maintenance cash because property owners have failed to pay service fees.

The full extent of the default rate, which has reached 75 per cent in some developments, is only now coming to light as developers hand over building management responsibilities to homeowner associations under the recently enacted strata law.

It means that the new homeowner groups could be saddled with debt as soon as they start taking over the management of their buildings.

For example, to replace a basic chiller in a tower building costs up to Dh3 million – and if there is no reserve fund in place because of service charge defaults, owners would have to foot the entire bill when the work was done.

“Service fee arrears is a big issue in many buildings,” said Gary Bugden, the executive chairman of PRDnationwide, a property services company. “A lot of people just aren’t paying.”

The amount paid in service fees has been a bone of contention for residents in some developments, where property prices have fallen by as much as half since the end of 2008.

Service fees surged during the boom years, with some developers charging up to Dh21.85 a square foot in annual fees, or more than Dh20,000 for a typical one-bedroom flat. Property owners started refusing to pay, either for services they felt were not provided or shared amenities that were poorly maintained.

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Dubai and Abu Dhabi now more affordable for expats

The declining rents in Dubai and Abu Dhabi have made the cities relatively affordable ones for expatriates compared to others around the globe, the latest Mercer Cost of Living Survey has found.

While Dubai ranks 55 on the list of most expensive cities, Abu Dhabi is only slightly more expensive with a rank of 50, which it shares with Frankfurt in Germany, the survey said.

It also threw up a few surprises: displacing Tokyo from its traditional spot at the top of the list, Luanda, Angola's capital, has emerged as the world's most expensive city for expatriates. Tokyo came in second, while, in another surprise, another African city completed the top three – Chad's capital ?Ndjamena. Moscow was in fourth position followed by Geneva in fifth.

The rear was brought up by Karachi, which the survey found to be the least expensive city for expatriates to live in.

The Mercer survey covered 214 cities across five continents and measured the comparative cost of over 200 items in each location, including housing, transport, food, clothing, household goods and entertainment.

"While across the UAE, the cost of living has remained relatively stable, we are seeing that accommodation costs have continued to decrease in Abu Dhabi and Dubai, driving down the overall cost of living for expats," said Dr Markus Wiesner, who heads Mercer's Dubai office.

He said Mercer increased the number of cities surveyed this year from 143 to 214, which means that the cities cannot be compared with their previous rankings.

For the first time, the ranking of the world's top 10 most expensive cities includes three African urban centres: apart from Luanda and Ndjamena, Libreville in Gabon comes in at seventh place.

The top 10 also includes three Asian cities: besides Tokyo in second place, Osaka at six and Hong Kong jointly ranked eighth. Moscow, Geneva and Zurich, which shares the eighth spot with Hong Kong, are the most expensive European cities, followed by Copenhagen at 10.

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