Dubai, Abu Dhabi most expensive cities in Middle East

Dubai, Abu Dhabi most expensive cities in Middle East

According to the survey, globally, the Angolan capital Luanda remains the world's most expensive city for expatriates.

By Issac John (associate Business Editor)

Published: Thu 18 Jun 2015, 11:59 PM

Last updated: Wed 8 Jul 2015, 3:18 PM

Dubai and Abu Dhabi ranked the 23rd and 33rd most expensive cities respectively to live in, according to a survey. KT file photo
Dubai and Abu Dhabi ranked the 23rd and 33rd most expensive cities respectively to live in, according to a survey. KT file photo

Dubai: Dubai and Abu Dhabi figure in as the most expensive cities in the Middle East for expatriates while Jeddah continues to be the least expensive city in the region, as per global HR firm Mercer’s “Cost of Living Survey 2015”.

The survey ranked Dubai and Abu Dhabi as the 23rd and 33rd most expensive cities respectively to live in. The two cities have experienced a significant jump compared to 2014, with Dubai soaring 44 places from last year’s position at 67 and Abu Dhabi going up 35 places, 68th in 2014, thanks to the strengthening of the dollar-pegged dirham and steep rental hikes.  

According to the survey, globally, the Angolan capital, Luanda, remains the world’s most expensive city for expatriates. Asian and European cities — particularly Hong Kong (2), Zurich (3), Singapore (4), and Geneva (5) — top the list of most expensive cities for expatriates.

A significant increase in the cost of living ranking is seen among almost all major Middle East cities. Both Manama (91) and Doha (99) moved up 59 places, Amman (54) moved up 49 places, Riyadh (71) moved up 40 places, Kuwait City (117) moved up 30 places, and Beirut (44), the most expensive Middle Eastern city after Dubai and Abu Dhabi,  moved up 19 places.

“Many currencies in the Middle East are pegged to the US dollar, which pushed the cities up in the ranking. Global currency fluctuations was a key factor influencing the significant changes observed in the overall raking in 2015,” said Nuno Gomes, Information Solutions leader for ME at Mercer. “Steep increase for expatriate rental accommodations, particularly in Abu Dhabi and Dubai, has also contributed to the increase of the cities in the ranking,” said Gomes.

While these increases in the ranking do not have a direct impact on employees currently working and living in the UAE and other countries in the region, the cost for multinationals to move staff to Middle East countries has greatly increased over the last year, “potentially reducing the attractiveness of the region for such assignments,” said Gomes.

For regionally based companies looking to send employees overseas on work assignments, these have become potentially much more affordable. “GCC based organisations may take this as an opportunity to increase their international assignment activity and provide greater career experiences to high potential employees,” Gomes said.

Just as foreign exchange costs create headwinds for many multinational organisations, currency fluctuations — driven by economic and political unrest — are contributing to the cost of expatriate packages for those on the front line of globalisation of their organisations. The survey finds that factors including instability of housing markets and inflation for goods and services impacts significantly the overall cost of doing business in a global environment.

“As the global economy has become increasingly interconnected, close to 75 per cent of multinational organisations are expecting long-term expatriate assignments to remain stable or increase over the next two years to address business needs,” said Ilya Bonic, senior partner and president of Mercer’s Talent business. “Sending employees abroad is necessary to compete in markets and for critical talent, and employers need a reliable and accurate reflection of the cost to their bottom line.” 

Other cities appearing in the top 10 of Mercer’s costliest cities for expatriates are Shanghai (six), Beijing (seven), and Seoul (eight) in Asia; Bern (nine); and N’Djamena (10). The world’s least expensive cities for expatriates, according to Mercer’s survey, are Bishkek (207), Windhoek (206), and Karachi (205).

Cities in the US climbed dramatically in the cost of living ranking due to the strengthening of the US dollar against other major currencies. While New York (16), the highest-ranked city in the region, remained the same as last year, cities on the West Coast, including Los Angeles (36) and Seattle (106) climbed 26 and 47 places, respectively.

While London (12) remained steady, Aberdeen (82) and Birmingham (80) rose in the ranking. Paris (46), Vienna (56), and Rome (59) fell in the ranking by 19, 24, and 28 spots, respectively. The German cities of Munich (87), Frankfurt (98), and Berlin (106) dropped significantly as did Dusseldorf (114) and Hamburg (124).

India’s most expensive city, Mumbai (74), climbed 66 places in the ranking due to its rapid economic growth, inflation on the goods and services basket, and a stable currency against the US dollar. This most populous city in India is followed by New Delhi (132) and Chennai (157) which rose in the ranking by 25 and 28 spots, respectively. Bangalore (183) and Kolkata (193), the least expensive Indian cities, climbed in the ranking, as well.

Elsewhere in Asia, Bangkok (45) jumped 43 places from last year. Hanoi (86) and Jakarta (99) also rose in the ranking, up 45 and 20 places, respectively.  

The survey is one of the world’s most comprehensive, 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 it. Currency movements are measured against the US dollar.

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