• Home
• /
• Business

'Dubai still a great place to live' despite the rising cost of living

DUBAI — The rising cost of accommodation, education, and healthcare are the main reasons for the significant increase in the cost of living Dubai residents have experienced over the past year, according to the 2007 Cost of Living Dubai report undertaken by the Dubai-based recruitment company, Kershaw Leonard. The report is due out today.

In some areas of Dubai, the price of rental accommodation has gone up by 50 per cent, said Kershaw Leonard's managing partner, Mike Hynes. The costs associated with education have also soared along with the cost of health insurance, which is now in the same pricing zone as Switzerland and Monaco — with BUPA Gold used as a benchmark, he said, explaining the contents of the report.

And contrary to popular opinion, "food inflation is not driving the overall level of inflation", said Hynes. "Everyday commodities and the majority of things in the supermarket are fairly stable." He also said that the cost of transportation has stayed the same. "Petrol hasn't gone up, the cost of owning a car hasn't gone up. Dubai is still a cheap place to own and run a car," he said. And nor has the cost of utilities gone up, he added.

To determine the increases in accommodation costs, the survey has taken a spread of rental prices in different locations around Dubai. In one example, the rental price of a four-bedroom villa in Al Barsha — once considered an "out-of-the-way" location — is now equivalent to a similar property in a Jumeirah compound. Rental costs range between Dh240,000 to Dh310,000 in Al Barsha and between Dh200,000 to Dh300,000 in Jumeirah.

The increase in accommodation costs raises a "very big issue for human resource (HR) managers," said Hynes. How do you set a set HR policy? he asked, when there is such a significant difference in accommodation costs for those new to Dubai and for those already residing here?

It is the cost of education, however, that is perhaps the most crippling for many families. Average annual fees for US, UK, or European curriculum schools, for years one to six, have shot up from anywhere between Dh21 to 46,000 per annum in 2006 to between Dh26,000 to 58,000 now. And Dubai College fees are set at Dh60,000 per annum.

Not only have school fees gone up but there are new costs as well. The report states: "As well as increases in tuition fees — most schools range between a 20 and 60 per cent increase — some schools structure their fee schedules to include heavy additional costs. In one case, the joining fee for new entrants to the school at kindergarten level was a whopping 130 per cent of the costs of that year."

Some schools are also charging annual "seat" fees, an extra 35 per cent on top of every year, explained Hynes. Then there is the cost of books, transportation, uniform and extra-curricula activity. New schools, such as Repton School Dubai and GEMS World School, are charging 80,000 each year. "The new schools that are coming in are dragging the fees even higher," said Hynes.

One of the main findings from this year's report is that Dubai has become "a tale of two cities, with some of the most significant increases at the top end", he said. "Those who have come to live a five-star lifestyle now have to make choices. They have to ask: can I afford the basics of living or do I send my family home?" As Dubai has become more expensive the reasons for moving here have significantly changed. "It is no longer possible to come here and put a load of money away for a rainy day. That's not why people come here now; it's a lifestyle choice," said Hynes.

The Leonard Kershaw report also considers the impact of these figures on real families, said Hynes. The first scenario is an Asian expat family living in Sharjah, with one five-year-old child. The father commutes to Jebel Ali free zone each day.

In 2006, the family income was Dh9,000 per month, with expenditure of Dh9,973. In 2007, these figures have increased to Dh11,500 income and Dh13,500 respectively. For this family, monthly costs break down as follows: accommodation 30 per cent; household 22 per cent; transportation 17 per cent; education 24 per cent; healthcare 5 per cent and lifestyle 2 per cent.

"Now there is no opportunity to save," said Hynes. "It is not a sustainable way to live. To be fair, the Asian expat family has no choices because a significant part of its money goes on the very basics."

The second scenario involves a young, single advertising executive living near Shaikh Zayed Road. In 2006, this person had monthly income of Dh14,000 and expenditure of Dh15,500. Today, although monthly income has increased to Dh18,000 expenditure has increased to Dh20,800. Monthly costs for this individual breaks down as follows: accommodation 46 per cent; household 12 per cent; transportation 21 per cent; healthcare 2 per cent and life-style 18 per cent.

The third scenario is a Western expat family with two children living in the Meadows. In 2006, this family's monthly income was Dh45,000 and expenditure was Dh40,000. Now, monthly income is Dh50,000 and expenditure is Dh53,000. Although there is still potential to save, it is becoming increasingly difficult.

Dubai is moving from being a "developing city to a world city," said Hynes, which explains, in part, why the cost of living has been rising. But despite the rapidly rising costs he still advises clients looking to move to Dubai "that it must be a great place to live because 80 per cent of the population is choosing to live here rather than somewhere else".