Dubai and Abu Dhabi still among most expensive cities for expatriates

Dubai and Abu Dhabi remain firmly entrenched among the most expensive cities in the world for expats, with the strong dollar being the primary factor in pushing them up the rankings. The former was placed 21st and Abu Dhabi 25th, based on the influential “Cost of Living Survey” brought out by the consultancy Mercer.

Dubai gained two spots from a year ago, while Abu Dhabi was at 33rd spot in the previous survey.

This year, Hong Kong gained the mantle of being costliest city worldwide and ahead of Luanda (Angola) and Zurich. Singapore and Tokyo were placed third and fourth.

“Price inflation in general was on the lower side across the board, which ensured currency fluctuations had the biggest impact on costs for expats,” said Rob Thissen, Talent Mobility Consultant at Mercer Middle East. “You had a situation when the likes of the pound, yuan and most of the emerging market currencies slipping against the dollar and that impacted on the individual city rankings. With most of the Gulf currencies pegged to the dollar, those cities moved up at the expense of those which dropped down.” (The survey’s findings were based on data collected in the 12 months to March 2016.)

“Definitely, Dubai has been seeing a slight deterioration in rental values - but the survey also takes in part of 2015

Mercer’s findings do give expats - and local businesses - some food for thought. The job market is still widely rated as being a soft one, through the pace of lay-offs might have subsided just that little bit. Companies are not in any rush to start hiring in a big way, hoping to see off this year without taking on too much of a cost burden on this score.

Expats will be hoping for some more leeway at the time of their home lease renewals. But the softening that has been going on is specific to a handful of residential clusters, essentially in the freehold areas, and not a city-wide phenomenon. Any further escalation on expenses could put a tight squeeze on household budgets.

Things are not that better off for their counterparts in Riyadh, ranked as the 57th most expensive city in the world and up from the 71st spot last year. But, interestingly, Jeddah figures some way down on the list, at 121th (up from 151st).

The dichotomy in rankings between the two Saudi cities is explained by “Riyadh having far higher residential rentals for expats than Jeddah does at the moment,” said Thissen. Also, “These rankings uniquely combine day-to-day expenditure on goods and services such as food, clothing and transportation, with rental prices. While prices of most goods and services are considered to be cheaper in Saudi Arabia compared with Europe, it is the expatriate rental market that pushes cities like Riyadh and Jeddah up the ranking.” 

Interestingly, Beirut is rated as the third most expensive city in the Middle East and 50th  globally for expats. This is despite a full-scale conflict raging on the country’s borders.

“There are two factors - the Lebanese currency’s dollar peg and on the rental side, there hasn’t been much of a change in rentals in the areas of Beirut where expats reside,” said Thissen.

And what of the immediate prospects for the dollar and by extension its influence on the cost of living? “From a bigger global perspective, emerging market currencies remain under pressure and investments are flowing back into those rated as stable economies,” said Thissen. “This leaves dollar economies and those pegged to it in a stronger position. You could have companies from non-dollar denominations having to offer more through allowances for their expat employees.”

But expats in the UAE would still make do with lowered rents.

Gulf states shoot up in cost of living index

1. Jordan tied with Beirut to be placed 50th in the global rankings. While Riyadh is at 57th, Manama has seen its ranking rise to 71st from 91st last year. Doha is placed 76th, up from 99th, while Muscat comes in at 94th (117th last year). Kuwait City is 103rd, having climbed from 117th position in 2015. Jeddah is at 121st, a change from 151st last year.

2. Cities in the US climbed in the latest rankings due to the strength of the dollar, which resulted in US cities being pushed up the list. New York is up five places to 11, the highest-ranked city in the region, while San Francisco and Los Angeles are at 26 and 27. Washington, DC is at 38th. up 12 places.

3. In South America, Buenos Aires (at 41) ranked as the costliest city despite a 22 place drop from last year. San Juan, Puerto Rico (at 67) follows as the second most expensive location in the region, climbing twenty-two spots. The majority of other cities in South America fell as a result of weakening currencies against the dollar despite price increases on goods and services in countries, states the Mercer report. São Paolo (128) and Rio de Janeiro (156) were down 88 and 89 places, respectively.

4. Two European cities are in the top 10 list of most expensive cities - Zurich at number three followed by Geneva (at 8), down three spots from last year. The next European city in the ranking, Bern (at 13), is down four places following the weakening of the Swiss franc against the dollar. The euro’s stability in contrast helped Paris (44), Milan (50), Vienna (54), and Rome (58) remain relatively unchanged.

5. Hong Kong emerged as the most expensive city for expatriates globally, while Singapore (at 4) remained steady and Tokyo (at 5) climbed six places. Shanghai (7) and Beijing (10) follow, while Shenzhen (12) is up two places.

6. Jordan tied with Beirut to be placed 50th in the global rankings. While Riyadh is at 57th, Manama has seen its ranking rise to 71st from 91st last year. Doha is placed 76th, up from 99th, while Muscat comes in at 94th (117th last year). Kuwait City is 103rd, having climbed from 117th position in 2015. Jeddah is at 121st, a change from 151st last year.

7. Cities in the US climbed in the latest rankings due to the strength of the dollar, which resulted in US cities being pushed up the list. New York is up five places to 11, the highest-ranked city in the region, while San Francisco and Los Angeles are at 26 and 27. Washington, DC is at 38th. up 12 places.

8. In South America, Buenos Aires (at 41) ranked as the costliest city despite a 22 place drop from last year. San Juan, Puerto Rico (at 67) follows as the second most expensive location in the region, climbing twenty-two spots. The majority of other cities in South America fell as a result of weakening currencies against the dollar despite price increases on goods and services in countries, states the Mercer report. São Paolo (128) and Rio de Janeiro (156) were down 88 and 89 places, respectively.

9. Two European cities are in the top 10 list of most expensive cities - Zurich at number three followed by Geneva (at 8), down three spots from last year. The next European city in the ranking, Bern (at 13), is down four places following the weakening of the Swiss franc against the dollar. The euro’s stability in contrast helped Paris (44), Milan (50), Vienna (54), and Rome (58) remain relatively unchanged.

10. Hong Kong emerged as the most expensive city for expatriates globally, while Singapore (at 4) remained steady and Tokyo (at 5) climbed six places. Shanghai (7) and Beijing (10) follow, while Shenzhen (12) is up two places.

Top 25 costly cities for expatriates:

1. Hong Kong
2. Luanda, Angola
3. Zurich
4. Singapore
5. Tokyo
6. Kinshasa (Democratic Republic of the Congo)
7. Shanghai
8. Geneva
9. Ndjamena (Chad)
10. Beijing
11. New York
12. Shenzhen
13. Lagos
14. Bern
15. Seoul
16. Victoria (Seychelles)
17. London
18. Guangzhou
19. Tel Aviv
20. Abuja
21. Dubai
22. Osaka
23. Brazzaville (Congo)
24. Copenhagen
25. Abu Dhabi

Mercer's Cost of Living Survey