Dubai has been ranked the 40th most expensive city in the world, according to new research. In a comparison of prices and earnings in 71 global cities, Swiss banking firm UBS AG (UBS), using a scale where 100 was calibrated for prices in New York, found Dubai stood at 81.5 points, placing it behind cities such as Warsaw and Moscow.
The report compared purchasing power across major cities and was based on the cost of a basket of 122 items and services weighted in favour of Western European habits.
The top five positions went to Oslo, Copenhagen, London, Dublin and Zurich with Oslo overtaking the others by considerable margin.
With the euro going strong, UBS found European cities are becoming more expensive.
In 2005, Dublin was the 13th most expensive city surveyed but moved up and has now been ranked fourth. And while Barcelona and Hong Kong were on the same range and equally costly in 2005, the former is today 22 per cent more expensive than the latter.
However, if rents are included, the ranking is reshuffled. According to the research, London is the most expensive city in the world in which to live and rent a property followed by Oslo, Dublin and Copenhagen. London is now 26 per cent more expensive compared to previous surveys.
Residents in Dubai are paying higher rents than they would have to in many global capitals the report found. As a result Dubai moved up in the rankings and is the 34th most expensive city in the world, if rents are included in living costs.
Researchers uncovered some surprising correlations. Living in Mumbai is about as expensive as Mexico City, said the survey.
The discrepancy, say the authors, is in the difference in developing cities’ price levels.
“The basket of goods we used in this study is biased toward Western European consumer standards. We only consider the cost of Western-style accommodations in Mumbai, which may be very high compared with average local prices,” said the report.
When it comes to salaries, Dubai again ranked 34th. The calculations, based on salary figures, social security contributions and the number of working hours, placed Dubai ahead of cities including Singapore, Johannesburg, Istanbul and Hong Kong.
However, when net earnings are compared, Dubai residents take home much more cash than workers in Rome, Athens and Seoul thanks to higher bonuses and other employee benefits.
Workers in Copenhagen, Oslo and Zurich continued to earn the most although Zurich’s net earnings are much higher than the other two.
“Salaries in international comparison in the United States have been burdened by the depreciation of the dollar. Coupled with inflation, this effect pushed Chicago down 11 places in our ranking. And New Yorkers now only rank 13th in gross earnings. Inflation tended to outpace salaries since our last study, driven by sharp increases in energy and food prices,” said the report.
And while Zurich’s residents may take home the highest net wages, the Swiss city does not offer the Western world’s lowest tax rates. Taxes and social security as percentage of gross income are lower in Dublin and Madrid for example.
According to the UBS report, Dubai is recreating itself as a new financial centre, and with the large oil reserves, the UAE offers one of the lowest tax and social contribution rates in the ranking.
The salary calculations were based on 2006 figures for 14 diverse professions. Uniform criteria were used with regard to work experience, age, marital status, etc. The pay index was weighted by the share of each occupation in overall employment and overall income and also by gender.
While calculating the 2008 update of the pay index, researchers took account of exchange rates and inflation. They said part of the economic growth was due to productivity improvements, which was passed on to employees in the form of higher salaries.
Dubai moved two spots down in the global rankings to 36th position when it came to domestic purchasing power a drop of seven positions compared to its 29th spot in 2006.
Excluding housing prices, workers in Zurich, Geneva, Dublin and Luxembourg, have the most to spend for the hours they work. However with 88.2 points, Dubai has overtaken Paris,
Johannesburg, Athens and Rome in the category. An hour’s labour in Dublin delivers almost 28 per cent more purchasing power than one in Amsterdam.
“But time spent at work varies in each city, and comparison of annual salaries can be very different from hourly earnings. When comparing purchasing power in terms of total annual earnings Los Angeles moves up to the fourth position, Tokyo moves from 24th to 10th and Berlin falls from the seventh to the 23rd place, reflecting Europe’s tradition of more leisure time,” said the report.
Salaries in London are among the most disparate in Europe, and lower earners typically live where housing costs are lower, outside of the city centre, according to the survey.
Across the globe, researchers found “the value of work is still uneven”. “Calculating purchasing power from gross salaries can indicate how much companies value their workers’ productivity. We find higher levels in Western Europe and North America than in emerging countries, an observation which has not changed since our last study.”