Dubai may be tax free but cost of living is set to rise this year
Feeling the pinch? Less money in your pocket every month? Wondering if Dubai’s getting more expensive? Well, the simple and blunt answer to all of this is yes. In fact, here are the cold hard facts to prove it.
Latest figures from the Dubai Statistics Centre revealed that prices in October last year rose by 4.4 percent, the highest rise since May 2009. Where’s the hike in prices happening? Rent and food.
Housing and utility costs, which account for almost 44 percent of a Dubaian’s average consumer expenses, rose 6.7 percent in the past year, while food and drink prices at local supermarkets, which account for 11 percent of the basket, increased 4.7 percent.
Expert number crunchers at Reuters predict this to continue in 2015, with overall inflation set to rise another three percent.
Feeling worried? You’re not alone. The latest Middle East and North Africa Consumer Confidence Index survey conducted by Bayt.com found that 81 percent of those polled believe the cost of living will rise in the UAE within the next six months.
Silviu Matei, director of YouGov, which compiled the survey, says, ‘An interesting point to note is that despite the fact that most people in the MENA region consider their personal financial situation to have either improved or stayed the same, a large proportion state that their savings have decreased. Despite high levels of confidence in the market, rising prices seem to negatively impact residents’ savings.’
Cost of living is now the number one worry for expats in Dubai, so much so that Bahrain, Qatar and Oman are now seen as more popular destinations to reside in among expats, with prices and expenses listed as the main reason against Dubai, according to HSBC’s annual Expat Explorer 2014 survey. On the plus side, while inflation is set to rise three percent this year, a survey by consultancy firm Aon Hewitt found that average salaries are also set to rise by 4.5 percent. So if you’re due a raise, start talking to your boss now and make sure it’s more than three percent at least, or you’ll certainly be worse off than you were before, simply due to inflation.
Rent is the biggest chunk out of your earnings. While it rose steadily in 2014, the good news is that in some areas it has actually started to decline. This is due to the slowing of the market and people moving to cheaper areas. Real estate firm Asteco found that after ten quarters of price rises, the third quarter of 2014 started to see the first declines.
Downtown Dubai, JBR, Green Community, The Meadows, The Springs and Arabian Ranches experienced the biggest drop, and even the ever-reliable Dubai Marina saw prices down by four percent. The basic reason for this is, people are moving to cheaper areas, so landlords in the pricey ones are feeling the pinch. Another positive is that after Christmas and New Year, traditionally, people decide on new resolutions, and those thinking of leaving hand in their notice and move. So by February, there is likely to be a lot more choice around and bargains might be found. At the moment, the five cheapest places on average to rent in Dubai are: International City (Dhs42,000), Discovery Gardens (Dhs58,500), Dubai Silicon Oasis (Dhs60,000), Dubai Investment Park (Dhs65,000) and Dubailand (Dhs65,000).
‘Rents are experiencing a slowdown in certain areas. For instance, in Jumeirah Lakes Towers, apartment rents fell by 4.6 per cent between June and August last year. Similarly, if you are looking to get a foot on the property ladder, house prices are likely to slow further in the coming months,’ says Michael Lahyani, CEO and founder of propertyfinder.ae, which compiled the report.
On the transport front, taxi fares have already risen this year, with metro fares to follow, while education fees are likely to increase, too, as spaces at schools become a premium and a shortage of teachers is likely to see high competition. This is good news for teachers looking to negotiate a new salary, but not for parents faced with higher school fees.
But here’s a warning. While the cost of living continues to rise and inflation is expected to keep going up, don’t become one of those who has resorted to using credit cards and personal loans to cover repayments on existing debts.
Around 28 percent of those who responded to a new poll conducted by the financial comparison website Compareit4me.com between July and August 2014, admitted they were falling into the short-term financial trap.
‘This is a concern,’ says Jon Richards, CEO of Compareit4me.com. ‘The cost of living in Dubai is rising and unfortunately at a faster rate than salaries. This is forcing some to use debt to cover basic costs such as rent, which is clearly not sustainable. Anyone struggling to make repayments on their current debts should speak to their creditors immediately to discuss the possibility of restructuring the debt,’ Richards advises.
But before you get too depressed, be happy that you are certainly better off living in Dubai then in most big cities. Check out Expatistan.com if you want to cheer yourself up. It shows that Dubai is 29 percent cheaper to live in than New York and 34 percent cheaper than London. It’s not so good if you’re from Delhi or Manila, though, as the emirate is 166 and 58 percent more expensive respectively.
So what should you do? The first step is to ask for a salary increase of at least more than three percent. Then, look to tighten your purse strings and lastly, perhaps, think about buying gold. It’s a good investment and fairly cheap at the moment.