UAE still a financial haven for expatriates

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UAE still a financial haven for expatriates

However, despite the positive sentiments, rising inflation and cost of living and expenses related to raising children here weigh down residents, reveals survey.

By Staff Report

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Published: Thu 23 Oct 2014, 10:53 PM

Last updated: Tue 7 Apr 2015, 8:51 PM

Expatriates across the world continue to recognise the UAE as a top destination due to its buoyant economic climate and the high potential for financial gain, a survey has underscored. Better job prospects and higher salaries are the reasons highlighted by respondents as the major draws of living in the country.

However, despite these positive sentiments, expats continue to face significant challenges due to the rising cost of living and expenses related to raising children here, according to HSBC’s annual Expat Explorer 2014 survey.

Expat Explorer 2014, a survey of close to 9,300 respondents from over 100 countries and 963 people in the UAE, assesses expat attitudes towards their host countries. This year’s survey revealed that the UAE ranked 15th overall as an expat destination out of those assessed, making it one of the most popular countries to settle abroad in the world.

Overall, Switzerland, Singapore and China ranked as the top three expat destinations, with Bahrain (5th) being chosen as the best place to set up a home in the Middle East.

Higher salaries

Expats with aspirations of boosting their earning potential and job prospects flock to the UAE, according to the report. Seven out of 10 respondents (71 per cent) said they would earn more here than in their home country, compared to the global average of 53 per cent. At the same time, 58 per cent expats associate the UAE with high salaries, outpacing the global average of 40 per cent.

The majority of expats also recognise the benefits of not having to pay taxes, as two-thirds (66 per cent) associate the country with a lower tax system. The report also revealed that 58 per cent say they have more disposable income here than their home countries.

As the economic climate here is expected to continue improving, increasing job opportunities will be another factor pulling people here. The report showed that 60 per cent of expats moved to the UAE for this reason, far outpacing the global average of 38 per cent.

Rising cost of living

In spite of the financial opportunities of living in the UAE, the survey showed that people are struggling to cope with the high cost of living standards. Indicative of these attitudes, six out of 10 expats stated that they would consider moving away from the UAE because it is too expensive, far higher than the global average of 32 per cent.

With inflation in the country rising to its highest level in five years this April, driven primarily by rising housing and food costs, it is not surprising that 75 per cent of expats said they spend more on accommodation, and 62 per cent on groceries. This is expected to rise further, as inflation in the UAE is predicted to reach 2.2 per cent by the end of the year, and hit 2.5 per cent in 2015, according to the IMF.

The report also revealed that the rapid increase in property rental prices is the factor that poses the biggest threat to the financial well-being of expats in the Middle East. This is more often cited in the region (22 per cent), compared to other places like Asia (18 per cent) and Europe (15 per cent). It is also most acutely felt by expats in the UAE (58 per cent), who highlight this issue more than any other country surveyed.

Andy Ripley, head of retail banking and wealth management, HSBC, UAE, said: “The high cost of living is an understandable source of concern, and we see that this is being compounded by 58 per cent of expats stating that their finances have become more complex since they moved. This is especially true for high earners who face difficulties in managing their finances across multiple countries and in various currencies. While there certainly are aspects that are out of people’s control, such as the cost of utilities or household goods, you can cut back your expenses in other areas through better financial planning.

“With better cars, higher quality accommodation and domestic help being most often cited as some of the benefits of living in the UAE, people here are often tempted to spend beyond their means. As a result, expats have to develop a better balance in order to benefit from the great salaries and career prospects, while coping with the high cost of living.”

Cost of raising children ‘worrying’

Another area that people in the UAE find difficult are the expenses related to raising children. An alarming 85 per cent said the overall cost of bringing up a child is higher than their home countries, while 77 per cent stated that they pay more for childcare than they did previously. Education is also often cited as an issue, with 86 per cent stating they spend more than they did previously.

On the other hand, one of the major positives for parents is that the UAE is recognised as among the top five safest countries to raise children (80 per cent). In fact, a larger proportion of expats associate the country with higher personal security (66 per cent), compared to the global average of 42 per cent. This also appears to contribute to the positive perceptions about the quality of life in the country. Over a third (37 per cent) said this was their main motivation for moving to the UAE, and over half (54 per cent) continue to associate with this sentiment after they arrive here.

Short-term expats

Nonetheless, the report revealed that expats view their stay in the country as transitory in nature, with the majority likely to consider relocating for retirement reasons. The report showed that over half (53 per cent) choose to keep most of their retirement provisions in their home countries. Only 13 per cent chose to keep these savings in the UAE, which is far lower than the global average of 41 per cent.

Ripley said: “As expats tend to view their stay in the UAE as a short-term venture, we see that many put off saving for this stage of life. Instead they should be looking to take advantage of the financial benefits offered by a career in the UAE in order to start building a retirement pot early. Consequently, people need to also consider portability of their investments and ensure their savings are not hindered by relocation.”

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