Soaring costs of housing and education have offset Dubai’s tax-free benefits that traditionally lures most expats to settle down in the emirate, a new study has found.
According to a whitepaper released by Economic Intelligence Unit and commissioned by Friends Provident International (FPI), several cost of living challenges, mainly high property and education costs, eat into the income of professional expats in Dubai.
“A tax-free income is without doubt one of the key benefits of living and working here,” said Marcus Gent, managing director, middle east and rest of the world at FPI.
“However, property rental prices in some areas of Dubai have risen 60 per cent over the last 12 months and some schools are proposing an increase in education fees of up to seven per cent this year.”
In the UAE specifically, there is a dearth of mid-range or affordable properties, which in turn forces expats to choose pricier accommodation than they otherwise would.
Although top end accommodation prices in the UAE compare favourably with the likes of more expensive markets such as London and New York, the market dynamics of these cities are quite different from Dubai, the report noted.
In addition, the hike in education expenses has also begun to create a dent in the tax-free benefits offered by the emirate, with many expats thinking of relocating to other parts of the world.
“School fees tend to increase dramatically at secondary school level – driven mostly by the salaries needed to attract the quality of teachers required,” the report added.
“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.”
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.”
Driven by housing and utility costs, Dubai’s inflation rates have been growing steadily in line with an economic rebound.
Inflation rates hit a five-year high in September this year, rising 4.2 per cent year-on-year with housing and utility costs growing by 6.5 per cent year-on-year, according to a report by Dubai Statistics Centre.