UAE cities become more affordable in 2020: Here is why.
Cities across the UAE are more economical now in 2020, as compared to the first-half of 2019, mainly due to deflation last year, as well as a fall in rentals, prices of groceries, lower cost of dining, and a strengthening of the Emirati dirham.
According to data provider, Numbeo's, latest figures, four emirates - Abu Dhabi, Dubai, Ajman, and Sharjah - saw their rankings falling in 2020 for the cost of living, in a comparative study of over 400 cities worldwide.
Dubai, the region's commercial, trade and logistics hub and the most expensive city in the UAE, saw its ranking declining from 114 to 152 in the cost of living index. Abu Dhabi fell from 150 to 186, while Sharjah dropped from 185 to 219, and Ajman from 201 to 243.
Ambareen Musa, founder and CEO of Souqalmal.com, noted that the drop in cost of living means that expats can now enjoy higher disposable incomes.
"With house rents going down and new residential supply coming into the market, expats can pick and choose where they want to live, and even upgrade to more prime locations and bigger homes. Ultimately, lower expenses translate into higher savings, giving more people an opportunity to save, invest and grow their wealth," she said.
Prathyusha Gurrapu, head of research and advisory at Core, said that rents and utilities are one of the biggest outflows amounting to nearly 20-30 per cent on an average of most household incomes.
"As rents have declined, many tenants have either upgraded to larger units or moved to more central locations at similar or lower rents. However, rental savings have been offset by other expenses such as utilities, school fees, groceries and the marginal increase in VAT (value-added tax) keeping other costs similar or slightly higher over the last few years. This, coupled with a lower levels of salary increments, have kept the overall cost of living steady," Gurrapu said.
Industry data has revealed that rentals in H1 2019 fell almost five per cent.
Musa noted that housing and utilities have the highest relative weightage in the UAE's Consumer Price Index (CPI), making up 34 per cent of the index.
"Looking at the latest statistics, we can see a decline of 4.17 per cent in the housing and utilities category during the last one year from November 2018 to November 2019 as well as a steady decline month-on-month. This doesn't come as a surprise, given the ongoing fall in house rents across major residential communities in the country. Apart from this, other primary household spend categories like food and beverage, and transportation have also shown a downward trend during the last year," Musa told Khaleej Times.
Even though certain costs have gone up, especially under categories like recreation and culture, which witnessed a hike of 26 per cent in the last year, Musa noted that their low weight allocation in the index hasn't made a significant impact overall.
According to Numbeo, the most expensive city at the beginning of 2020 is Zurich in Switzerland. Zurich is followed on the list by four other cities in Switzerland - Basel, Lausanne, Geneva, and Bern. Cities in Norway take up the next three spots staring with Stavanger at sixth place, followed by Oslo, and Trondheim. These are followed by Reykjavik in Iceland, and Bergen, again in Norway.
New York is ranked 11th, while San Francisco came in at 12th out of 440 cities in the world. Tokyo, ranked 18th globally, is the most expensive city in Asia. Cities in Africa are all in the bottom half of the list, with the most expensive ranked city being Pretoria in South Africa at the 252 spot.
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