Abu Dhabi and Dubai to be more affordable

Anish Mehta, chairman of the Institute of Chartered Accountants of India – Dubai Chapter, said the cost of living for an individual or a family comprises mainly home rent, transport costs, school fees, grocery and household supplies including food costs, telecommunication and other utility bills, domestic help, clothing and recreational costs.

“The reason for reduced costs of living in the UAE is mainly a reduction in home rent costs, which are on a decreasing trend due to more supplies in the market. All other costs are also stable. Reduction in oil prices leading to reduced transport costs is another reason for stable cost of living,” he said. Mehta noted that increased competition in business also plays a key role as it leads to competitiveness in prices in other goods and services, resulting in benefit to consumers.

Akbar Naqvi, CEO of Zasar Holdings, said the rise in the cost index was not sustainable and frankly detrimental to both cities’ growth prospects.

“A combination of natural market forces and proactive government intervention has allowed this trend to reverse and now with the Covid-19 shock it should accelerate movement back to the mean,” said Naqvi.

Among other GCC cities, Bahrain and Jeddah became slightly costlier, dropping from 86th to 82nd position and 100th to 96th position, respectively. Doha, Kuwait City and Muscat became more economical.

Globally, according to the EIU’s Worldwide Cost of Living 2020 index, three cities — Singapore, Hong Kong and Osaka — share the top spot as the world’s most expensive to live in. They are followed by New York, Paris, Zurich, Tel Aviv, Los Angeles, Tokyo and Geneva. The top 10 most economical cities were mostly in the Indian Subcontinent, led by New Delhi, Bangalore, Chennai, Lusaka, Caracas, Karachi, Buenos Aires, Almaty, Tashkent and Damascus.

How about 2021?

Fitzroy said looking ahead to 2021, although supply chain disruptions and demand spikes for essential goods are likely to lead to sharp price rises for some products, the overall trend globally is likely to be a fall in the cost of living owing to a significant hit to demand.

“We expect this to be felt most in cities where a large part of demand is derived from oil revenue and/or tourism. So Dubai and Abu Dhabi, in particular, where demand is responsive to both of those factors, there is likely to be dampening effect on the cost of living,” Fitzroy said.