The cost of living in the UAE continued to drop in the first-half of 2018, thanks to fall in rents, lower government public service fees, freeze and reduction in school fees and, most importantly, rising strength of the dirham against major currencies. It also improved residents' purchasing power and quality of life.
According to mid-year Cost of Living Index released by Numbeo, Dubai and Abu Dhabi were rated 113 and 97, respectively, in the list of most expensive cities during the first-half of 2018 as compared to 72 and 93, respectively, during H1 2017. This reflects that the country's two biggest emirates became more affordable for the residents and tourists.
The data showed that the purchasing power of Dubai residents improved from 101.67 points in H1 2017 to 153.68 in the first-half of 2018. While cost of living index improved from 73.95 to 53.32 during the comparative period. Among other sub-indexes, the emirate further improved its rating in safety index, healthcare index, property price to income ratio, pollution index and climate index during the comparative period. All these factors further improved the quality of life index as well in Dubai.
But Traffic Commute Time was the sole index where the emirate's rating declined during comparative period.
While Abu Dhabi fared well in quality of life, safety and healthcare indexes but rating for purchasing power and traffic commute time indexes fell during the first-half of 2018 as compared to the same period last year.
Ambareen Musa, founder and CEO of Souqalmal.com, said that while VAT has driven up the prices of various products and services in the UAE moderately, a steady fall in residential rents has served as a cushion to keep inflation in check.
"Housing and utilities have the highest weightage in the UAE's Consumer Price Index (34 per cent), and a look at CPI statistics shows a continuous decline in this category month-on-month," Musa said.
She opined that wide-ranging policy measures by the UAE government including a three-year freeze on government public services fees and a Central Bank cap on banking fees among others, will also help boost consumer confidence and keep cost of living in check.
Robert Jackson, regional director, RICS, said most significant cost of living decrease has been prevalent in accommodation, whether residents are looking to purchase or indeed rent.
"With increased accommodation being added to the market, continued downward pressure on property costs and lease rates has helped the consumer. We have also witnessed many residents move to smaller and more affordable housing options as this sector has seen significant product delivery and in doing so, residents are encountering lower costs surrounding fees and utilities," Jackson said.
He pointed out that there needs to be a balance between cost of living and earnings.
"The growth of Dubai revolves around the population growth (resident and short-term/tourism) and several of the fee reductions are aimed as stimuli to keep people in Dubai or attract people to Dubai. The details surrounding the 10-year visas and 100 per cent onshore foreign owned businesses are keenly awaited and could provide necessary incentive to keep the underlying population growth and job creation on an upwards trend," he added.
According to property portal Bayut.com's first-half 2018 figures, average apartment rentals fell moderately in Abu Dhabi with the largest decreased 9-10 per cent. Buyers and renters continue to have the upper hand in the Abu Dhabi property market, but price decreases are overall slightly more modest than in Dubai.
Haider Ali Khan, CEO of Bayut, said tenants and buyers are firmly in the driving seat, with renters likely to bargain with landlords to negotiate a lower rent, or upgrade by moving to a larger property or a new area.
"The decrease in sales prices opens up opportunities for buyers too. Whether you are renting or buying, it is a good time to make a move in the Dubai property market," he said.
Vijay Valecha, chief market analyst at Century Financial Brokers, said a combination of government initiatives as well as a slump in real estate have contributed to the decline in the cost of living in the first-half of this year.
He emphasises that the recent government initiatives such as reduction in licensing fees for establishment and cut in municipality fees for hospitality sector get transmitted through the general economy to the residents and help in toning down the inflationary expectations.
"However, we should not forget the role of recent US dollar appreciation which has increased the purchasing power of UAE residents as dirham is pegged to the greenback. Looks like happier times are here for the people of UAE," Valecha added.
Syed Ali Naqvi, authorised consultant, Nexus Insurance Brokers, says drop in rent and low inflation make Dubai more affordable for expats.
He noted that though there is a marginal increase in the prices of goods following VAT implementation, so people are now more circumspect in their expenditures.
Globally, according to Numbeo, European cities, especially Switzerland, dominate the list of the most expensive cities. Hamilton, Zurich, Basel, Lausanne, Bern, Geneva, Reykjavik, Lugano, Stavanger and Oslo round off the top most costliest cities in the world.
By Waheed Abbas
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