Dubai: How far will your Dhs1,000 go to sustain you now?
The answer for most to this question is “it depends” on where you’re spending it.
It’s no secret that living in Dubai and Abu Dhabi can be pricey.
Regardless of which survey or study you look at, the numbers and rankings may differ, but the idea is the same.
Read more:
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What can Dh1,000 buy for you
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Dubai was ranked third most expensive expatriate city out of 13 in the world by Swiss bank UBS earlier this month.
According to the ranking, the emirate is the priciest destination in the GCC.
Abu Dhabi is the most expensive city in GCC followed by Dubai, if we’re to consider the 2018 Worldwide Cost of Living report by the Economist Intelligence Unit in March.
Mercer’s 2017 annual cost of living survey ranks Dubai as the 20th most expensive city for expats out of 25 cities, while Abu Dhabi ranked 23rd.
But here comes the good news, as Dubai is among the 10 cities with the highest salaries, coming in at number 9 with average salaries averaging more than $3,400 (Dh12,400) a month, a Deutsche Bank study said.
CA Naveen Sharma, Chairman of the Institute of Chartered Accountants of India – Dubai Chapter, estimates that, on average, a family of four with an income of Dh10,000 a month, which is close to the average income mentioned above, will be able to meet their basic needs in the UAE but there are considerations.
“They have to plan their expenses and exercise financial discipline [to make ends meet]. A lot depends on someone’s lifestyle also,” Sharma told Gulf News.
The perception that the 5% Value Added Tax introduced in the beginning of the year made budgeting harder may be true to some extent, Sharma said, but not entirely.
“VAT has made an impact on people’s lifestyle but not in a very major manner. VAT rate is very low and the major expenditure item, which is residential house rent is exempt from tax.
"Other basic items which will attract VAT will increase the cost of living, but at the same time, government will use the VAT amount to provide higher standard of living as well,” Sharma explained.
The UAE’s inflation rate was 3.5 percent in April 2018, up from 3.4 per cent the month before and after hitting a 2015-high of 4.8 per cent in January after the government imposed a 5 per cent VAT, figures from Trading Economics show.
The main expenditures considered as basic needs that eat up a resident’s salary are housing cost, utilities, transportation, food and groceries, and school fees and child care.
Freeze in school fees
Feeling the burden of many parents, the Dubai Executive Council in June announced a freeze on school fees for the coming academic year. This provides relief for those already feeling the squeeze.
Still, cost of living is not the same for all, Sharma said, especially for the rich, the not so rich, and the poor.
“Rich people will obviously prefer higher standard of living, making their costs of living also high. On the other hand, poor people will have basic needs to fulfil, making their cost of living cheaper for them as compared to rich people.
"For rich people, cost of living can be subjective but for lower and middle-class people, living cost is more of an actual picture of the market and economy,” Sharma said.
InterNation’s Expat Insider Survey of more than 12,500 expats from 188 countries, including the UAE, focusing on cost of living in 2017 revealed that expatriates’ opinion on the cost of living in the UAE has worsened in relation to the global average from 2014.
Cost of living satisfaction rate
“In 2014, the satisfaction rate regarding the cost of living in the UAE was at 38 per cent, only 16 percentage points below global average (38 per cent UAE vs 54 per cent global), whereas the 2017 difference has grown to 20 percentage points (28 per cent UAE vs 48 per cent global),” Malte Zeeck, InterNations Founder and co-CEO, told Gulf News.
Despite this, the survey also revealed that around three in five expatriates in the UAE (61per cent) are satisfied with their financial situation – compared to a global average of 64 per cent.
“Some expats seem to struggle to cover daily living expenses, as in 2017 close to three in 10 expats (27 per cent) state that their disposable household income is not enough to cover everything they need—compared to a global average of 23 per cent,” Zeeck said.
This means, out of every 10 expats, 3 said their disposable income is “not enough” to cover daily living expenses, another 3 said it is “about enough”, while 4 said it’s “more than enough”.
Sending families home
Some residents who can’t cope with rising living costs, especially single-income households, have already made a difficult decision of sending their families home and staying behind to stretch their dirham’s buying power.
For Sharma, the best way to beat inflation is to increase one’s earning power. Saving, investing diligently and consistently in mutual funds and stocks, even in property, can help in the long run.
Eliminating debt and living on less than you make are also key.
“Spend your hard-earned money carefully. I always recommend preparing a monthly budget and sticking to the budget.
"It will help in controlling and monitoring your expenses. Other means to control their expenditure is to control reduce their unwanted expenses,” he said.
