Has cost of living gone up for expats in Dubai, Abu Dhabi?

Dubai ranked as the 18th most expensive city to live in for an international employee, in the recently released ‘Cost of Living City Ranking 2023’ list by Mercer which looked at over 200 cities across the globe. The emirate comes second to Tel Aviv, which ranks number 8th globally, as the second most expensive city for an expat to live in, in the Middle East.

Meanwhile, Abu Dhabi too has gone up the ranks and ranks 43 on the list.

One of the key drivers behind the changes in rankings is the surge in rental costs across most cities, according to the report. After Singapore, which has seen rent increases averaging 50 per cent depending on the area, Dubai is the second city in the survey where the rental cost has had a significant impact on the ranking with rent increases averaging 25 per cent.

By contrast, the impact of the housing movement has been notably lower in Abu Dhabi, where the change ranges between 6-8 per cent and in some areas remains the same as last year.

Apart from the increase in rent, the Mercer report has identified an increase in the cost of living in other categories in both Dubai and Abu Dhabi. For instance, the cost of food in supermarkets has risen by up to 11 per cent, transportation by 4 per cent, sports and leisure by 5 per cent.

Cities in Saudi Arabia such as Riyadh (85) and Jeddah (101) have also jumped up the global list, by 18 and 10 spots respectively.

Commenting on the survey findings and the UAE’s cost of living, Vladimir Vrzhovski, financial services and technology industries lead at Mercer Middle East, said, “Employers in the UAE are taking note of these changes. Our research indicates that organisations have provided an average of 4.2 per cent annual merit increase in 2023. Many of them are reviewing their remuneration packages, with a growing number increasing bonuses instead of increasing base salaries to increase the total compensation without long term commitment. Our research shows that as a response, 40 per cent of the surveyed organizations have reviewed their 2023 policies by increasing their housing allowances on average by 5-10 per cent based on the career level.”

Despite climbing in the rankings, the report noted that the UAE’s relative cost of living remains competitive when compared with major global cities. Factors such as inflation, exchange rate fluctuations, and housing costs contribute to these changes. The UAE has been proactive in managing these issues, reflecting its strong economic resilience.

Cost of living drives rankings

Hong Kong once again topped Mercer’s ‘Cost of Living 2023 City Ranking’, as the most expensive city for international employees. It is followed by Singapore, which jumped up six positions since last year, pushing Zurich to spot number three.

The global top ten includes five European cities, four of which are in Switzerland, with the fifth being Copenhagen. Global hubs like London (17), Amsterdam (28) have dropped in the ranking by a few spots, while New York (6) climbed up the ranking by one position.

Explaining the emerging changes, Vrzhovski, said, “Despite the benefits of a growing economy, the survey shows that key factors that have shaped the world’s economy in 2022 will continue to exert an influence into 2023, with inflation and exchange-rate fluctuations directly impacting the pay and savings of internationally mobile employees. We can also see from the 2023 Global Risks Report from the World Economic Forum (WEF) and Marsh McLennan that the cost-of-living crisis is one of the most severe risks perceived by national governments and businesses around the world. The impetus for inflation mitigation is one that private businesses and the public sector must share.”

The least expensive locations in the ranking include Havana, which dropped 83 spots, due in part to strong currency devaluations mid last-year, and two cities in Pakistan — Karachi and Islamabad.