#Kuwait no longer a Paradise for Expats

Long, long ago, in a classroom far, far away (Salmiya) there stood a teacher who attempted to explain to his students why expats (such as himself and themselves) choose to relocate to the Desert Oasis known as Kuwait.

“It is for 3 letter word ending with X, and it is NOT the first thing you think of!”

With these pearls of wisdom, we are continuously reminded of why we are (correction, were) happy here as expats – TAX free income. Now granted some countries’ residents  are required to pay tax if they earn a certain amount per year, however for the rest of the working stiffs, our incomes remain tax free.

Sadly, however, our incomes are no longer that safe:

Rent is Rising, rising, rising…

ExplodingThermometer

One of the first lessons we learn in Business School is that price is downward inflexible, meaning the age-old adage of “what comes up must come down” is incorrect when it comes to $$.

As stated in the Arab Times (link) in an article eloquently titled “Hell Of Rent Irons Hits Both Expats, Citizen”:

As per recent statistics, there are about 405 buildings, 3,407 villas, 5 palaces, 435 houses, 899 chalets and 2,206 traditional houses that are vacant and can meet the current demand.

the irrationality in charging KD 350 rent for a small apartment with one bedroom and a living room and KD 1,000 for a house in a residential area. The landlords explained that the increase in rents is due to the high cost of building materials.

 tenants stressed the lack of proper justification for increasing the rents without any increase in their salaries, revealing that they spend more than half of their salaries to pay the monthly rents.

“Paying the monthly rents has become a nightmare for the breadwinners, irrespective of whether they are Kuwaiti citizens or expatriates. If this problem of increasing rents continues, expatriates may have to go back to their motherland with their families, and citizens may have to start living in tents”.

The tenants expressed their shock about landlords charging almost KD 500 for apartments with two or three bedrooms and a living room in Hawally, Jabriya, Salmiya and Salwa.

They urged the concerned authorities to intervene in this matter and put an end to this phenomenon before expatriates are forced to take the decision of either leaving the country with their families or sending only their families to their country, which however will transform Kuwait into a country of bachelors.

Taxes are the price we pay for a civilized society. – Oliver Wendell Holmes, Jr.

However, exorbitant rents only serve to line the pockets of corporate fat-cats.

fat-cat-

 

The main problem is not merely that he rents are high, it is that the spaces offered are not reflective of the amount being requested. Growing up in Kuwait in the 1990’s, spaces were lavish and rents were relatively low, with a 2-bedroom apartment going for 100KD a month. Granted the AC was split units and not central, but that did not matter as the rent went hand in hand with the salaries at the time.

In addition, the increase in rent does not go hand-in-hand with an increase in salary, meaning your salary grows at a much slower rate than the expenses around you:

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One of the major increases in rent happened when rent allowance for citizens was increased (link) causing building owners to retrospectively increase their rents to accommodate the increased spending power of citizens.  As you can see, it is a vicious circle – due to the law of scarcity in Economics materials today cost more than they did last year as they are finite resources. The government decides to increase rent allowance for citizens, and the market decides to also increase their prices (downsides of Capitalism and consumer-driven demand).

Expats do not get rent allowance. The price increase is unilateral on all. 35-50% of salaries is going on a monthly basis for the necessity of shelter.

Can you imagine what Kuwait would look like if the breadwinners decide to send their families back home and move in with their friends, turning Kuwait (as stated above) into a giant Bachelor pad?

Warning, NSFW:

August 2011 ( View complete archive page )

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