Cost of Living Index: Dubai now a more affordable city
January 14, 2019225
Fall in inflation, stronger dirham and substantial increase in purchasing power of residents help in new index
Thanks to persistent decline in rents, reduced government fees and fines, and freezing of school fees, Dubai has become even more affordable in 2019 compared to the previous year with rentals and prices of groceries and restaurants declining on a year-on-year basis.
According to the latest Cost of Living Index data by Numbeo, which collects databases about cities and countries worldwide, Dubai is rated as the 217th costliest city in the world in 2019 compared to 210th in the previous year - helped by a fall in inflation, a stronger dirham and a substantial increase in purchasing power of residents.
When compared to the world's six costliest cities, Dubai was 53 to 58 per cent cheaper than the Swiss cities of Basel, Zurich, Lausanne, Bern, Geneva and Lugano, which were rated the costliest cities in the world, in terms of prices of groceries and restaurants. Restaurant and grocery prices in Dubai are substantially cheaper compared to Basel by 53 per cent and 70 per cent, respectively.
Rentals in Dubai are cheaper by just five per cent. But if the cost of living index is combined with the rental index, the emirate becomes much cheaper at 45 per cent.
Among other top cities, Dubai overall is 45 per cent cheaper compared to New York because rents in the emirate are lower by 57 per cent, groceries by 38.4 per cent and restaurant prices by 41 per cent compared to the US city. Dubai is 33 per cent more economical than London because rents, groceries and restaurants costs are less by 38 per cent, 37 per cent and 10 per cent, respectively, against The City, which was rated the 26th costliest in the world.
Monica Malik, chief economist at Abu Dhabi Commercial Bank, said the fall in property prices across Dubai has been a central factor behind the marked moderation in headline inflation, with other causes such as the drop in oil prices also contributing.
"The soft inflation rate reflects a number of headwinds facing the economy, such as the correction in the real estate market and the weak domestic demand. Moreover, the strong US dollar is helping to contain imported inflation, but is also impacting the competitiveness of key non-oil sectors externally," she said.
Ahmed Shaikhani, managing director at Shaikhani Group, attributed this to lower commercial rentals, reduction in fees by the economic department and lower costs for imports and exports of goods from the emirate.
"Commercials rentals have fallen consistently over the last few quarters. The economic department has reduced charges as part of the ease of doing business so initial capital required to start a business has also declined substantially in Dubai. In addition, the cost of imports and exports goods are also very low," said Shaikhani, an ex-president of the Pakistan Business Council.
Highlighting the cost of starting a business in Dubai, he pointed out that investors can obtain an offshore licence for less than $1,000 and can start a trading company for $2,000. Commercial rents are also very attractive at less than Dh40 per square foot in Jumeirah Lake Towers and Business Bay.
"When we compare Dubai to other global cities such London and New York, Dubai is certainly among the top for ease of doing business, low cost for investments and to start new business," Shaikhani added.
"The main reason for the reduction in the cost of living is the decline in rents. Also, some government fees have declined or stopped increasing. School fees last year were also frozen," said Anita Yadav, senior director and head of fixed income research at Emirates NBD.
She noted that the reduction in the cost of living is attractive for foreign labour, and does not really increase return on investment.
Sheikh Najm-us-Saqib, a Dubai resident for over 10 years, said the biggest relief for residents came from the fall in rentals.
"I was paying Dh30,000 rent but now it has gone down to Dh26,000, which was the biggest relief for us. We have also witnessed retailers resorting to more promotions and discounts which benefitted, to a large extent, people like us from the lower-middle income group," he said.
Among sub-indices, the rental index of Dubai dropped 35 per cent, groceries fell 37.7 per cent and restaurant prices were lower by 12 per cent year-on-year.
In another important note, according to Numbeo, the local purchasing power of Dubai's residents substantially improved from 123.7 points in 2018 to 133.5 in 2019, at par with the world's costliest cities of Basel, Zurich and Lausanne which scored 132.5, 140 and 127.4, respectively.
In Abu Dhabi, according to Numbeo statistics, the cost of living increased as the emirate's ranking jumped from 299 in 2018 to 185 in 2019. Though the overall cost of living index and other sub-indices such as rents, groceries and restaurant prices dropped, local purchasing power of the emirate's residents also dropped from 131 to 106.6 year-on-year.
Data showed that the decline in inflation in the UAE capital was small. Rentals fell 3.6 per cent, groceries were down 2.2 per cent and cost for dining out dipped just over 2 per cent.
In the GCC region, Doha, Manama, Riyadh and Muscat were 203rd, 214th, 246th and 249th, respectively.
Among the top 10 costliest worldwide, the top six slots went to the Swiss cities followed by Stavanger (Norway), Reykjavik (Iceland), Oslo (Norway) and New York. In the list of 433 cities ranked by Numbeo, Indian and Pakistani cities were the most economical. Rawalpindi (Pakistan) was rated the most economical followed by Thiruvananthapuram, Vijayawada, Visakhapatnam, Kochi, Karachi, Navi Mumbai, Vadodara, Coimbatore and Bhopal.
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