Expats tell how their changing financial circumstances meant they had to leave the UAE

Expatriate salaries and benefits used to allow people to live luxuriously and still save. But the past years of rises in housing and education have wiped away the easy living of the 2000s.

Andrea Pollock and her family left the UAE before the cost of living became unsustainable for a family of teachers. Courtesy Andrea Pollock

Not once during her 11 years in Abu Dhabi did Andrea Pollock indulge in a manicure, a Friday brunch, an extravagant holiday or a flashy new car.

“People were green with envy that we paid our mortgage off while living in Abu Dhabi, but they didn’t want to hear how disciplined we were to do that,” she says. “They cringed when I told them I’d never visited Burj Khalifa or Atlantis, not even Ferrari World or Yas Waterword. They also cringed when they heard I did most clothes shopping in Lulu, Max and Red Tag, or when they saw I happily drove a four-year-old Mitsubishi Lancer manual car and didn’t own an iPhone.”

Despite their thriftiness, Mrs Pollock, 43, and her husband – both teachers – moved back to Australia last July with their two children, ages nine and 11, when they felt price rises had made it difficult for them to continue saving.

“We feel very lucky that we made the move to Australia when we did, and didn’t wait for prices to increase to the point where we would have been forced to leave.”

However, Mrs Pollock’s account of sacrificing the trimmings of the expatriate’s life is no longer uncommon, with many UAE expats now forced to tighten their budgets if they still want to return home with a sizeable nest egg in place.

“Overall, costs of living in the UAE have soared in recent years, with core living expenses such as housing, education, medical expenses and transportation fees showing little sign of slowing down, despite reports of some stabilisation in certain sectors of the housing market in recent months,” says Samer Kader, the head of SEI Investments in the Middle East.

“Many expats who may be used to a savings culture in their home countries get swept up by the various lifestyle and entertainment choices on offer in the UAE and abandon the savings principles they may have once had. This has led to too many cases of expats returning home with nothing to show for all their years of work in the UAE.”

In November last year, Friends Provident International (FPI) released a white paper, UAE Expatriates and the Bottom Line, revealing how expats now face hidden costs and high prices that could offset the benefits of working in a tax-free environment, with property and education standing out as the biggest challenges. Property rental prices in some areas of Dubai have risen 60 per cent over the past 12 months and some schools are proposing an increase in education fees of up to 7 per cent this year, according to Marcus Gent, the managing director of the Middle East at Friends Provident International.

With the British newspaper The Telegraph last week warning of a potential "expat exodus" from Arabian Gulf states because of the dramatic decline in oil prices, savers are advised to offset predicted price rises by cutting down on life's luxuries.

“A tax-free income is without doubt one of the key benefits of living and working here. But a lot of expatriates seem to fritter away the savings they make in tax, rather than make the most of the great opportunity they have to save,” says Mr Gent.

Eight years ago, Annie Rodriguez, now 32, left her one year-old daughter in the Philippines to move to the UAE. She now earns Dh7,000 a month as a sales supervisor at an oil and gas company – but is also more than Dh100,000 in debt because of the charges she is paying off on her eight credit cards.

“I am the only one who supports my family,” says Ms Rodriguez. “From the time I came here I needed to send back home more money than my salary, so I used to get cash from my cards. I continued sending remittance, while still not able to pay my cards off.

“I’ve changed my job four times and thank God my salary has increased, but the sad part is that at the same time my liabilities also increased because of the interest I’m paying.”

Ms Rodriguez says her biggest expense is rent, adding that she has failed to send any money home for the past three months due to rising costs.

The white paper found that although top-end accommodation prices here compare favourably with the likes of London and New York, there is a dearth of mid-range properties, effectively forcing many expats to take pricier accommodation than they would otherwise.

Mrs Pollock and her family’s three-bed apartment on Khalifa Street in Abu Dhabi cost Dh85,000 in 2003, including valet parking (as there was no underground parking) and membership at the gym and pool access in an adjacent hotel.

“Within two years these bonuses were cut off and we had to park across the road on the Corniche, and pay extra”, says Ms Pollock. “The rent went up to about Dh180,000 at its peak for newcomers, but luckily we were protected at the time by the yearly 5 per cent rent cap. We wanted to move, but our housing allowance was only Dh130,000, so we couldn’t afford a new place unless we reached deeply into our pockets. We decided to stay and keep saving.”

However, with the removal of the rent cap in Abu Dhabi in November 2012, Ms Pollock believes her rent would have shot up this year, hampering the family’s ability to save.

According to HSBC’s annual Expat Explorer 2014 survey, the rapid increase in property rental prices is the factor posing the biggest threat to the financial well-being of Middle East expats.

Almost nine in ten respondents also said the overall cost of bringing up a child is higher than their home countries, and six out of 10 expats stated they would consider moving away from the UAE because it was too expensive.

One family forced out for financial reasons were the Bowdens. Unlike Mrs Pollock, Michael Bowden, 51, says he found it impossible to save in his last two years in the UAE. Things came to a crunch last September, when his wife and three teenage children moved back to the UK from Dubai and Mr Bowden started a new job in Saudi Arabia.

“There comes a point where you look forward and all you can see is a big hole,” says Mr Bowden. “You try your best to shield the kids from it. You have them in a reasonable house and a good school, but everything else falls by the wayside. Even on that sort of financial structure, I looked forward and thought, ‘it’s still not going to work’.”

Mr Bowden came to the UAE in 2000 when swollen expat packages provided him an easy life to spend freely and save. His government job, helping to set up Dubai’s economic freezones, paid more than Dh80,000 a month along with a Dh200,000 yearly housing allowance, flights and school fees for his three children. These days, such generous packages are hard to come by in his line of work.

“Now the mantra is ‘we’ll pay you a reasonable salary, but you’ll be lucky if you get a decent package.’ The housing allowances are capped and the school fees don’t include all your children, so if you compare it, you’re easily 25 to 30 per cent worse off than 14 years ago.”

However, SEI’s Mr Kader says the competition for talent caused by unprecedented corporate growth rates has led to higher compensation packages.

“As a result, companies are budgeting for greater-than-anticipated salary increases over the coming years. However, these increases are not necessarily offsetting the rising cost of living, as many employees fail to manage their expenditures.

“One option is for companies to offer savings schemes. Recent months have seen a surge in interest by companies looking to offer such schemes, brought on by the need to recruit and retain highly skilled talent. Besides promoting a saving culture, companies may also set up matching programmes where employee contributions are matched by the employer as part of a total rewards package.”

But it’s too late for Mr Bowden. “Before, I might say without thinking about it ‘let’s go on this holiday’. But more recently, we had to pull back and say ‘there’s no way.’ Because then you feel like you’re blowing money you haven’t got. I started doing comparisons. Fantastic comprehensive state schools are free in the UK, and you can rent a really nice house for one third of what you rent in Dubai.“

But expats considering heading home should take heed of Mrs Pollock’s final words: “I have to bite my tongue every time people complain about prices in Abu Dhabi. Yes, housing in Abu Dhabi is expensive and prices are going up uncontrollably. School prices are the same as in Australia for private schools, as is day care. However, everything else is three to ten times cheaper in Abu Dhabi.”

Follow The National's Business section on Twitter