prices hot spot
Written by 7DAYS | Monday, 20 June 2005

7DAYS

EmerDubai has leapt up a prestigious annual survey of the world’s most expensive cities - and is moving up the cost of living ladder at a quicker rate than just about any other metropolis in the world. In the past year, Dubai has leapfrogged the likes of Boston and Washington to become the world’s 73rd most expensive city, according to the Mercer survey published this morning.

While in many respects Dubai is considerably cheaper than New York, London and Tokyo, a number of items, such as a cup of coffee and a trip to a fast food restaurant are on a par with anywhere in the world. According to the report from Mercer Human Resource Consulting, Tokyo is the most expensive city in the world, followed by Japan’s second city, Osaka. London ranks third, followed by Moscow.

Mercer says the cost of rent in Dubai – a hot issue among the city’s workforce – remains relatively low compared to mega cities such as Tokyo, New York, and London. The fastest climbers on the table are among the countries that joined the European Union last year. Their performance has been skewed by a strong euro, while countries whose currencies are linked to the dollar have generally fallen down the rankings.
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Indeed all the other Gulf cities surveyed fell in the rankings apart from Dubai, which jumped from 83rd to 73rd. Without the ‘dollar effect’ – in which price rises are deadened because of the weakening of the dollar - Dubai would have risen much higher.

But residents of the UAE’s second city should perhaps think themselves lucky – the capital, Abu Dhabi remains more expensive, although it is now just nine places ahead of Dubai, compared to the 21 places that separated them last year.Last year, Dubai was ranked as the 83rd most expensive city in the world in the Mercer Consulting annual Cost of Living Survey.

This year it has jumped ten places to 73rd, reflecting the inflation that residents have been reporting anecdotally for some months.

The only other cities to have leapt by such an amount come from a group of former Eastern Block European nations who last year joined the EU, such as Warsaw in Poland, Prague and Bratislava in the Czech Republic.

Dubai’s leap of ten places is made all the more extraordinary, because its currency is linked to the dollar, which has fallen dramatically over the last 12 months. If the dollar had stayed stronger, Dubai would have jumped even higher up the rankings.

It is now more expensive to live in Dubai than in a number of major US cities, including Boston, Washington, and Atlanta. However, despite the protestations of Dubai residents, the cost of living in Dubai remains lower than in Abu Dhabi, which ranks 64th, two places lower than last year. At the top of the table is Tokyo, as it was last year, but London has been replaced by another Japanese city, Osaka, in the number two spot.

Moscow falls from number three to number four, thanks to Osaka’s upward trajectory, while Seoul, the capital of South Korea moves from number seven to number five. The rest of the top ten are made up of Geneva, Zurich, Copenhagen, Hong Kong, and Oslo, with Milan, Paris, New York and Dublin sitting just behind them.

The cheapest city in the world to live in is Asuncion in Paraguay, follwed by the capital of the Philippines, Manila, Buenos Aires in Argentina and Bangalore in India. The survey covers 144 cities in all, measuring more than 200 items in each location, including housing, transport, food, clothing, household goods and entertainment.

A snap shot of Dubai versus the world’s major cities shows that rent - one of the things that people are most concerned about in Dubai - is still considerably less than elsewhere. A two-bedroom luxury appartment in Dubai costs $1,770 per month, half the price it is in New York or London, and nearly one third of the price in Tokyo.

Music CDs are significantly less than in any of the major cities, and so are inernational newspapers. Going for a cup of coffee, or visiting a fast food restaurant will cost you about the same in Dubai as in New York. Mercer Human Resource Consulting carries out this annual survey to help multinationals set appropriate conpensation for their expatriate employees.

“The challenge for multinational companies is to ensure their expatriate compensation packages remain fair and attractive enough to retain key employees, while making sure they do not pay over the odds and find themselves at a competitive disadvantage,� said Yvonne Sonsino, a partner at Mercer.

"While there has been significant investment by multinationals in traditionally low-cost countries, the gap appears to be closing and local salaries are shooting up as a result of higher living expenses and an increased demand for skills," she said.

"Companies need to keep pace with the changes, and we find that many are now seeking guidance as they make regular review of their expatriate compensation packages a standard procedure."

A straw poll by 7DAYS has found that salaries are not increasing in line with inflation, and if one takes into consideration the fall in the dollar then Dubai residents are significantly worse off than in previous years.

There are more expensive cities in the Middle East. Kuwait City ranks one place higher than Dubai at 72nd, but it had fallen 12 places in the last year. Beirut is also higher than Dubai, at 52nd, but has fallen 15 places in the last 12 months. Dubai has the highest inflation in the Middle East by far.