According to the study, conducted by the Economist Intelligence Unit (EIU) on behalf of Friends Provident International, while certain costs of living in Dubai and Abu Dhabi are significantly lower than in other major cities, these overlook the much higher costs which can been accrued in other areas.
For example, according to the EIU’s Worldwide Cost of Living Survey, which is based on a basket of goods and services, and tracks over 50,000 key prices in over 130 cities around the world, prices in Abu Dhabi and Dubai are 38% and 42% respectively less than Sydney, Australia.
The gap is less pronounced but still significant for London (35% and 37%) and New York (27% and 30%).
However, FPI points out the EIU index does not include the cost of property and education, which many expatriates in the UAE find the most significant cost of living challenges.
Marcus Gent, managing director, Middle East and Rest of the World at FPI said: “Having recently moved to the UAE from the United Kingdom I can relate to the findings outlined in the paper. A tax-free income is without doubt one of the key benefits of living and working here.
“However, property rental prices in some areas of Dubai have risen 60% over the last 12 months and some schools are proposing an increase in education fees of up to seven per cent this year.
“A lot of expatriates seem to fritter away the savings they make in tax, rather than make the most of the great opportunity they have to save. With some careful financial planning and disciplined saving, the cost of a quality education and buying a property can be mitigated to a large extent.”
Adam Green of the Economist Intelligence Unit, and editor of the paper said: “While the UAE does still offer high salary packages and zero income tax, expats should not assume they are going to simply pocket the difference of the tax break, with everything else staying equal.”
Pricier accommodation
FPI explained that although top end accommodation prices in the UAE compare favourably with the likes of London and New York, they sit atop a very different – and more polarised – market. In the UAE, there is a dearth of mid-range properties, effectively forcing many expats to take pricier accommodation than they otherwise would.
Coupled with the rise in accommodation prices, the rising cost of education has also made some expatriates currently living in the UAE reconsider how long they will stay in the country.
School fees tend to increase dramatically at secondary school level – driven mostly by the salaries needed to attract the quality of teachers required. Accordingly some expatriate families plan their UAE stay, and set career goals, in five- or 10-year periods to coincide with a move home, or to another country, when their children reach secondary school age.
FPI’s conclusions are corroborated by Insight Discovery’s fifth annual Middle Eastern Investment Panorama report, released last week, which found that financial advisers based in the UAE increasingly see the rising cost of living in “as a major challenge as it reduces the ability of their clients to save from their regular income”.
Insight Discovery said of those surveyed, 74% ranked rising cost of livening as a threat, with only 24% seeing this as an opportunity to give advice. However, the report did highlight Bahrain as an exception where living costs are roughly half of those in Doha and Dubai. Advisers there saw this as an opportunity to capture business from other regional centers.
