Falling rents has made Dubai more affordable for expatriates and the trend also dragged down the emirate ranking 26 places, compared to last year as most expensive city in the world, according to a new study by Mercer.
The trend of falling accommodation costs continues across the Middle East, driving the cities down the global cost of living ranking and, particularly in the case of politically stable markets such as the the UAE, making them potentially more attractive places for expatriates to live.
Mercer’s 2011 Cost of Living Survey, released on Tuesday, shows that Abu Dubai is ranked the most expensive city in UAE for expats. Dubai, now ranked 81 globally, has dropped 26 places compared to last year.
Callum Burns-Green who heads Mercer’s Dubai office, says: “Dubai in particular has witnessed a reduction in accommodation costs since 2009 as the strong supply of property coming on to the rental market has reduced the shortage that existed in the several years prior to 2008. The Government has also announced plans to control inflation in other key areas such as the cost of food.”
Other cities across the GCC were ranked: Riyadh (135), Manama, Bahrain (157), Kuwait City (159 ), Doha Qatar (164), Muscat, Oman (184) and Jeddah (185).
The Mercer Cost of Living Survey data is the most comprehensive in the world and is used by firms and governments to help determine remuneration for expats being relocated to cities across the globe.
Luanda in Angola is the world’s most expensive city for expatriates for the second year running, largely due to the high costs associated with security and safe accommodation, according to Mercer’s 2011 Cost of Living Survey. Tokyo remains in second position and Ndjamena in Chad in third place. Moscow follows in fourth position with Geneva in fifth and Osaka in sixth. Zurich jumps one position to rank seventh, while Hong Kong drops down to ninth.
The survey covers 214 cities across five continents and measures the comparative cost of over 200 items in each location, including housing, transport, food, clothing, household goods and entertainment. It is the world’s most comprehensive cost of living survey and is designed to help multinational companies and governments determine compensation allowances for their expatriate employees. New York is used as the base city and all cities are compared against New York. Currency movements are measured against the US dollar. The cost of housing — often the biggest expense for expats — plays an important part in determining where cities are ranked.
New entries in the top 10 list of the costliest cities in the world are Singapore (8), up from 11, and Sao Paolo (10), which has jumped 11 places since the 2010 ranking. Karachi (214) is ranked as the world’s least expensive city, and the survey found that Luanda, in top place, is more than three times as costly as Karachi. Recent world events, including natural disasters and political upheavals, have impacted the rankings for many regions through currency fluctuations, cost inflation for goods and services and volatility in accommodation prices.
“Multinational companies have long understood the competitive advantage of a globally mobile workforce, though the enduring challenge is to balance the cost of their expatriate programmes. Currency fluctuations, inflation, political instability and natural disasters are all factors that influence the cost and quality of living for expats. It is essential that employers understand their impact, for cost-containment purposes but also to ensure they retain talented employees by offering competitive compensation packages that are tailored to the needs of the expatriate on the ground,” said Callum Burns-Green.
“During the period of data-collection for this year’s survey the world has witnessed an incredible number of natural disasters and political upheavals that have all affected the lives of expatriate employees to some extent. The resulting currency fluctuations and the impact of inflation on goods and services — petrol in particular — have impacted the changes to the cost of living ranking of many cities.
Overall, cities in the Middle East have moved down the table reflecting a reduction in cost relative to other regions. Where the depreciation has been accompanied by political stability and good levels of security, such as in the UAE, all other things being equal, we would generally expect a favourable impact on those cities from an economic perspective as expatriates and their employers see a reduced cost of living and doing business there.”