Cost of living falls in Abu Dhabi and Dubai

Living in either Abu Dhabi or Dubai costs less than it did last year, although the cities are still two of the most expensive to reside in within the Middle East. (Silvia Razgova / The National)

Abu Dhabi and Dubai are no longer the most expensive cities in the Middle East after tumbling property prices pushed down the cost of living

Abu Dhabi dropped nine places from last year’s position in this year’s Worldwide Cost of Living survey by Mercer, the human resources consultancy, to become the 76th costliest city to live in globally.

The cost of living in Dubai has also fallen, with the city ranking 94th overall this year compared with 81st last year.

Instead, Beirut has become the costliest city in the region. The Lebanese capital climbed eight places to 67 in the ranking.

Tokyo overtook Luanda in Angola to become the most expensive global city.

“Playing on an infusion of factors, the UAE has seen its cities prove less expensive on a global scale,” said Zaid Kamhawi, Mercer’s information product solutions business leader in the Middle East, during the release of the index yesterday.

“It means accommodation prices are either stable or falling or at least inexpensive relative to other cities.”

Accommodation prices make up about 25 per cent of the index, with the cost of food, education, transport and entertainment also accounted for in the survey. Mercer collates the cost of goods and services used by expatriates to sell to companies and governments around the world. They use it to determine how much to compensate staff living abroad.

Falling rental prices have helped to moderate the cost of living in the UAE since the global financial crisis of 2009. Then Abu Dhabi and Dubai were the 26th and 20th most expensive cities globally as well as being the most costly regional cities in the index.

Slower rises in the prices of other goods and services relative to New York, which is used as the index’s base city, also helped to dampen living costs, Mercer said.

It conducted the survey between the end of February and the start of March. The fall in costs came despite a rise during the past year in the US dollar compared with other major currencies.

“The dirham is pegged to the dollar and that should help make the UAE more expensive,” said Mr Kamhawi.

Abu Dhabi and Dubai’s improved ranking in the index was little surprise given data showing “little or no inflation” for the past three years, said Liz Martins, the senior economist in the Middle East and North Africa at HSBC.

“It’s a positive for the UAE and helps make both cities more attractive for businesses in the region,” she said. “Their status has already been boosted by unrest elsewhere in the region.”

Elsewhere in the Middle East, rising expatriate accommodation costs stoked living costs in Kuwait City and Riyadh. Kuwait City climbed 25 notches from last year to 134 this year. Saudi Arabia’s capital was the 123rd costliest city, up 12 places from the previous index.

Unrest pushed the cost of living in Damascus down, as its ranking slipped 43 places to 166. Mr Kamhawi said the slide was most probably linked to the 23 per cent dip in the Syrian pound against the US dollar during the past year.

The cost of living changed less in other cities that experienced instability during the Arab Spring.

“Manama, Tunisia and Cairo have seen very little change in their cost of living ranking compared to last year,” he said.

The Top 5 Most Expensive Cities, Globally, for 2012:

1 Tokyo, Japan

2 Luanda, Angola

3 Osaka, Japan

4 Moscow, Russia

5 Geneva, Switzerland

The Top 5 Most Expensive Cities, in the Middle East, for 2012:

1 Beirut, Lebanon

2 Abu Dhabi, UAE

3 Dubai, UAE

4 Amman, Jordan

5 Riyadh, Saudi Arabia

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