Dubai and Abu Dhabi were ranked the 23rd and 33rd most expensive cities worldwide to live in, a recent survey by research firm Mercer showed.
The rankings of the two cities have shot up significantly from the previous year, indicating the steep growth of living costs.
Dubai moved up 44 places from the 67th position last year while Abu Dhabi went up 35 places from its 68th position in the 2014 list compiled by Mercer.
The findings are also in line with reports by residents who have noted a growth in the cost of living in the UAE.
Almost half of UAE residents said that their income has not been keeping pace with the cost of living, a report from HSBC showed.
Both cities were also the most expensive places for expats in the region while Jeddah was the least expensive city, the survey said.
Most major cities in the Middle East also saw a jump when compared to last year’s cost of living index. Manama and Doha, which are currently ranked at 91th and 99th places respectively, moved up by 59 places. Meanwhile Riyadh and Amman moved up by 40 and 49 places respectively in the cost of living index.
Beirut, which is the most expensive city in the Middle East after Dubai and Abu Dhabi, jumped 19 places in the list this year.
“Many currencies in the Middle East are pegged to the US dollar, which pushed the cities up in the ranking,” said Nuno Gomes, principal, Information Solutions Leader Middle East, Mercer.
“Global currency fluctuations were a key factor influencing the significant changes observed in the overall raking in 2015. Steep increase for expatriate rental accommodations, particularly in Abu Dhabi and Dubai, has also contributed to the increase of the cities in the ranking.”
Such a steep growth in the cost of living in the UAE has also reduced the attractiveness of the region to multinationals that are planning to increase their presence in the region, the study said.
On the other hand, firms in the UAE who are looking to send their employees overseas are expected to benefit from this as such assignments will be more affordable.
Currency fluctuations resulting from economic and political unrest have further raised the cost of expat packages for companies globally, Mercer noted.
Luanda, the capital of Angola continued to be the most expensive city on Mercer’s list for the third consecutive year. Hong Kong, Zurich, Singapore and Geneva were the other top expensive cities globally.
Mercer’s cost of living survey includes 207 cities across five continents and measures the comparative cost of more than 200 items in each location, including housing, transportation, food, clothing, household goods, and entertainment.