Expat life is cheaper in Dubai and Abu Dhabi

Living costs in Abu Dhabi and Dubai have declined, with both cities sliding down a global index of the most expensive cities for expatriates.

Abu Dhabi has moved to 67th this year from 50th last year in the worldwide cost-of-living survey. Randi Sokoloff / The National

More affordable housing means Abu Dhabi and Dubai have both improved sharply in an index of the world's most expensive cities for expatriates.

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Abu Dhabi has moved to 67th this year from 50th last year in the worldwide cost-of-living survey. Dubai is ranked as the 81st most expensive city, dropping 26 places compared with last year.

Both cities were still found to be more expensive than elsewhere in the GCC for foreign workers.

Luanda in Angola is the costliest city globally for expatriates, followed by Tokyo and the capital of Chad, N'djamena. Karachi in Pakistan ranked as the cheapest, the survey found.

"For organisations looking at places to do business in, the UAE is stable at a potentially lower cost," said Callum Burns-Green, the head of Middle East operations at the HR consultancy Mercer, which produced the survey.

Falling living costs have been highlighted by economists as important in helping to bolster the country's attractiveness for doing business. The UAE's credentials as a regional financial and services centre have also been enhanced by the absence of unrest afflicting other parts of the Middle East.

The survey offers an insight into the steep decline in living costs since the global financial crisis struck. In the 2009 survey, Abu Dhabi was the 26th most expensive city and Dubai the 20th.

Since then, residential rents, which typically account for the largest part of expatriates' expenses, have fallen by more than half from their peaks.

A retreat by foreign investors and an oversupply of units have hastened the decline in rents.

But falling rents may not be all good news for expatriate workers.

Market declines meant some employers were starting to offer less-generous housing allowances to some employees moving to the region, said Mr Burns-Green.

"For individuals who maybe want to move to a location and are younger and are moving to enhance their career, there's probably a general trend to reward them less," he said.

Senior management would still be likely to be offered generous packages to encourage them to locate to the region, he said.

Annual UAE consumer price inflation increased to 1.4 per cent in May, far below the double-digit inflation of 2007 and 2008.

Price controls on foods in the UAE had also helped the cost-of-living performance of UAE cities against cities elsewhere, said Mr Burns-Green.

The survey of 214 cities on five continents compared costs of more than 200 items in each location including housing, transport, food, clothing, households goods and entertainment.

The survey is designed to help multinationals and other companies determine compensation allowances for their expatriate staff.

New York was used as the base city, with currency movements measured against the US dollar.