In the vortex of Dubai’s cost of living whirlwind

Armani Hotel

You know it’s serious when TikTok teenagers are into it.

“Dubai’s cost of living is like a whirlwind…and sweeps away your savings faster than you can say ‘Sale!” ran the subtitle beneath a 10-second video forwarded to me by my 14-year-old daughter.

She was using the video – all speeded up film of Dubai scenes – as evidence that her monthly allowance should be increased because of the big inflationary pressures she faces.

No doubt there have been significant rises in the cost of Sephora cosmetics, Nike trainers and Careem slushy drink deliveries.

But those are not what most residents of Dubai think of when they count the cost of living. It probably goes accommodation, food, transport, school fees (where appropriate), leisure and recreation, more or less in that order. And all are on the rise.

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True, the rate of increase has slowed since last summer, when it hit around 7 percent as the shocks first came through from energy prices, global food chain bottlenecks and interest rate rises.

This will slow in the UAE this year to around 3.5 percent, the International Monetary Fund and the UAE Central Bank agree, before dipping to around 2.5 percent in 2024.

That is well below the inflation rates in many parts of the world. The UK just reported a most recent rate of 8.7 percent, for example, and the global average, according to the IMF, will be 7 percent in 2023.

So why does Dubai feel so darned expensive? In a word: ‘shelter’, as the economists rather quaintly put it. The cost of having a roof over your head, and maybe a garden, swimming pool and car port in a desirable area of the city not too far from the beach and the mall has sky-rocketed over the past year.

If you’re buying this year, you’re looking at a premium of as much as 15 percent over 2022, which itself saw a 20 percent rise as Dubai opened up aggressively after Covid.

That is for what most of us would regard as a “nice” house or apartment. For the luxurious villas and high-rise super-apartments in swankier parts of town, the sky is the limit.

If you’re a new renter, you’ll be paying around 26 percent more than the previous tenant for a villa in the better parts of town, according to real estate consultant CBRE recently. 

Incidentally, the reason such enormous increases do not show in the official inflation figures (shelter accounts for roughly 30 percent of average outgoings) is that these take into account the value of existing tenancy contracts, which are capped by law and for the most part limited to 5 percent.

All the other items are going up in price too. Bloomberg recently did an identical shop in Dubai and London Waitrose stores that showed the emirate was some 40 percent more expensive.

Uber and Careem fares are on the rise, and increasingly subject to the infuriating “surge” charge. School fees, frozen for the Covid period, are increasing again this year. Dinner and a few drinks at a restaurant seems more expensive than ever, despite the abolition of the 30 percent alcohol tax earlier this year.

Talking of tax, in less than a week Dubai and the rest of the UAE will be paying corporate tax at 9 percent per year for the first time in its history. Again, this is minimal compared to other parts of the world, but will add significantly to the cost of doing business, as well as the cost of living.

There have been some anecdotal stories of Dubai residents moving to cheaper areas of the city, or to Abu Dhabi, or even to Saudi Arabia or Qatar. But I don’t think this will become a significant exodus.

The flipside of the cost of living surge and soaring accommodation costs is the economic and property boom that Dubai is experiencing at the moment, with all the opportunities for prosperity the good times inevitably bring.

In a city as canny as Dubai, one man’s price gouge is another man’s windfall profit.