Revealed: Most expensive cities to live in (Dubai not in Top 3 in MEA)

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It may come as a surprise for some of us living here in Dubai, but the emirate is more affordable to live in than almost two-thirds of the world’s 133 cities ranked by the Economist Intelligence Unit’s (EIU) annual Cost of Living Report 2015.

For the record, Amman, Nairobi and Abu Dhabi remain the most expensive cities in the Middle East and Africa region (MEA) even as Riyadh and Jeddah rank among the region’s Top 5 least expensive cities.

If the look on your face right now is one of disbelief, you’ll be forgiven. For, it is indeed surprising to see Dubai ranked among the more affordable cities since a majority of the emirate’s residents would have witnessed inflation first-hand: rents have been inching up, children’s school fee is rising, so is the monthly grocery bill, and the food and entertainment bill is dearer, among many other things.

But believe it – according to the EIU’s stringent and meticulous criteria, Dubai is more affordable than the likes of Malaysia’s Kuala Lumpur, Thailand’s Bangkok and China’s Beijing.

Regionally, Jordan’s Amman holds the dubious honour of being the most expensive city in MEA. Ranked at No. 48 worldwide, Amman enters the global Top 50 this year, and has become more expensive compared with last year, rising four slots from No. 52 in 2014 rankings.

The EIU survey compares more than 400 individual prices across 160 products and services. These include food, drink, clothing, household supplies and personal care items, home rents, transport, utility bills, private schools, domestic help and recreational costs.

Even as most items of daily use along with services and rentals are becoming more expensive in Dubai, it must be noted that this is not a local trend – things are getting dearer across most of the cities surveyed. So, even as Dubai residents end up paying more for enjoying the same lifestyle this year compared to last year, residents in some of the other cities surveyed too paid more.
In fact, the cost of living in Dubai is about 30 per cent cheaper than New York, the base city of the survey. “Overall, the region continues to supply value for money,” EIU’s Jon Copestake, Editor of the Cost of Living report, said in comments sent to Emirates 24|7.

“Prices are structurally lower than in Western Europe or North America (or parts of Asia),” he says. “On average, the cost of living in Africa and the Middle East is 35 per cent lower than in New York. Even Dubai, a regional shopping hub with a highly developed retail sector, is about 30 per cent cheaper than New York,” says Copestake, who is also EIU’s Chief Retail & Consumer Goods Analyst.

However, a stronger US dollar makes local services dearer in international comparisons even as imported goods are cheaper for residents of the UAE, which has its currency pegged to the greenback. A stronger dollar – and therefore a stronger UAE dirham – means that goods priced in other, weaker currencies can be bought for lesser dirhams, making them ‘cheaper’ for us.

On the other hand, the cost of services and local goods, priced as they are in dirhams, appear expensive in global comparisons, pushing the country’s cities higher in Cost of Living rankings. Even as Dubai retains its position among the ranks of the world’s more affordable cities to live in, a rising inflation is clearly taking hold.

“As with many other factors, the cost of living in Africa and the Middle East is volatile, with inflationary pressures and currency weakness driven by changes in oil prices as well as political and economic instability,” says EIU’s Copestake.

EIU says its survey, which has been carried out for more than 30 years, is a tool to help HR and finance managers calculate cost-of-living allowances and build compensation packages for expatriates and business travellers.

The 2015 Worldwide Cost of Living survey shows that living in Dubai has become more expensive than the year before, with the emirate’s cost of living rank moving up 11 slots, from No. 94 last year among 133 metropolitan cities surveyed to No. 83 this year.

“In cost-of-living terms, the two regions [Middle East and Africa] can be divided along lines of whether currencies have been pegged to the US dollar or not. In the case of the former, the relative cost of living has risen. Cities in the UAE, Saudi Arabia, Jordan, Qatar, Kuwait and Oman have all seen rises in their ranking,” Copestake says.

This rise of 11 places makes Dubai more expensive to live in, but still more affordable than it was four years ago, in 2011, when it was ranked as the world’s 78th most expensive city. Even as Dubai’s rank in the Cost of Living table has been fluctuating, thanks in part to the varying dollar value, the emirate has steadily become more competitive by becoming overall affordable over a period of time.

The emirate was ranked at No. 56 in 2003, and since then its affordability and attractiveness as a magnet for businesses as well as professional workers has clearly received a boost.

The UAE’s capital Abu Dhabi too has become more expensive this year (jumps five slots from last year’s rank) although the jump in its rankings is less pronounced than Dubai’s.

At No. 77 globally, Abu Dhabi is ranked as the region’s third most expensive city. This suggests that the UAE capital is a relatively more expensive place to live in than its more flamboyant neighbour although it remains ranked in the bottom half of the 133 cities surveyed.

Kenya’s Nairobi is the MEA’s second most expensive city, rising four slots this year to rank at No. 69 worldwide. “Elsewhere, Sub-Saharan African cities such as Lusaka in Zambia, Abidjan in Côte d'Ivoire and Dakar in Senegal have all become relatively cheaper, falling down the ranking as a result. Part of the reason for this is that one of the dominant Sub-Saharan African currencies, the CFA franc, is pegged to the euro rather than the dollar,” explains Copestake.

“Although the cost of living in Sub-Saharan Africa is falling, it is North Africa and the Middle East that supplies the cheapest cities in the region,” says Copestake.

“Algiers and Damascus both feature among the world’s 10 cheapest, while price controls also put the Saudi cities of Jeddah and Riyadh, alongside Pretoria in South Africa and Muscat in Oman, in the cheapest 20 cities surveyed,” he adds.

Global Rankings

Globally, Singapore heads an unchanged top five, with Paris (#2), Oslo (#3), Zurich (#4) and Sydney (#5) all remaining structurally expensive, EIU the report states. There is plenty of movement lower down the list, however, especially relating to exchange rate weakness, it notes.

Caracas, in Venezuela, falls 124 places, from #6 in last year’s ranking to 4th from bottom this year. Kiev (Ukraine) and Tehran (Iran) fall 38 and 61 places, respectively, it adds.

“The situation of an unchanged top five is very rare for the Worldwide Cost of Living Survey and disguises some significant global drivers that are impacting the cost of living everywhere,” comments Copestake.

“In fact, a look at the data six months ago would have shown a different top five, and things are changing quickly, especially with the fall in oil prices. Rebasing the survey to today’s exchange rates would put Zurich top, highlighting how fluid the global cost of living has become,” he says.

It is not just emerging markets that are prone to slides. Japan’s Tokyo, which was replaced as the world’s most expensive city last year, has fallen to 11th place as low inflation and a weak Yen take their toll. Conversely, Seoul, in South Korea, is rising quickly up the rankings. Ranked 50th five years ago, it is now in the Top 10.

Despite topping the ranking, Singapore still offers relative value in some categories. For basic groceries, Singapore is only 11 per cent more expensive than New York, but it is the joint most expensive place in the world alongside Seoul to buy clothes, with the malls of Orchard Road offering a price premium that is over 50 per cent higher than New York.

Most significantly, Singapore's complex Certificate of Entitlement system makes car prices excessive, with Singaporean and transport costs almost three times higher than in New York.

Karachi in Pakistan and Bangalore in India offer the best value for money. Indian cities make up four of the six cheapest. Structurally low wages and price subsidies on some staples have made for a highly price sensitive market and it seems that falling oil prices will add further weight to this.
 

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