Dubai, renowned for its lavish luxury and five-star everything, could be getting too expensive for expatriate middle-market workers, as costs continue to increase and pay rises become rarer.
The emirate’s tax-free status and higher wages have long held a strong appeal for expatriates from all corners of the world.
But as the cost of living continues to climb, with Emirates NBD forecasting that Dubai’s consumer price index inflation will rise to 3.5 percent on average this year, up from the 3.3 percent recorded last year, that may not be enough for those in the middle income bracket.
Rents in the emirate have increased by as much as 15 percent since the Real Estate Regulatory Authority rental index was updated in March.
Dubai is the most expensive city in the Middle East, according to New York professional services firm Mercer’s 2024 cost of living data, jumping up three places from last year to 15th on the global ranking.
The consultancy Immigrant Invest, based in Malta, specialises in helping people obtain second citizenship and residence permits. It marked a single person’s estimated monthly expenses in the UAE at AED4,000 or $1,100, excluding rent. A family of four would spend AED14,000 a month
At the same time, the latest salary survey from the recruitment company Cooper Fitch reveals that companies in the UAE, on average, are not budgeting for pay rises for employees over the next 12 months.
The report consulted 1,000 organisations in the Gulf region, and revealed that almost a third of respondents in the UAE reduced salaries to new recruits this year.
Trefor Murphy, founder and CEO of Cooper Fitch, says: “Particularly the new people in Dubai or the people that might look at Dubai or the people that are young that are trying to get that first rung on the ladder, they’ll find it tighter.”
However, he maintains that Dubai and the wider UAE are still appealing options for expatriates.
“I think the salaries are already at a level that they’re attractive,” he said. “The reality is, you can go nowhere else in the world to get that money.”
In addition, Murphy says, Dubai does not need to be the land of milk and honey any more because “they’ve got plenty of scope about them, the safety, stability and diversity.”
The recruitment company Halian’s 2025 GCC market report and salary guide revealed that while 40 percent of professionals in the UAE were given an increase in their salary, this was based on performance and ranged only from 5 percent to 10 percent.
Halian CEO Stuart Fry says: “These increments are often not enough to keep up with the rising cost of living in the UAE, particularly in areas like housing and education.”
Hasnain Malik, managing director for emerging and frontier markets equity strategy at the global data provider Tellimer, says: “So many factors are in Dubai’s favour, but deteriorating affordability is a risk for medium-term population growth.”
An influx of wealthy new expatriates into Dubai has exacerbated the problem by creating a growing market for higher-end development.
The real estate research company ValuStrat found that in August this year the average price for residential real estate in Dubai was at a record high of AED1,490 per sq ft, while the average size of homes sold was at a record low of 1,450 sq ft.
The Emirati lawyer Habib Al Mulla told AGBI columnist Frank Kane last month that “ridiculously, ridiculously high” school fees and government levies, and landlords’ ability to charge outsized rent increases, are prompting some expats to leave places like Dubai.
“It’s very difficult to bring them back again,” Al Mulla said. “It’s not enough to say we are attracting millionaires. That’s one class. But we also need to maintain the middle class.”
This week Dubai developed Deyaar launched the AED1.5 billion Park project, targeting the mid-market segment.
Its CEO Saeed Mohammed Al Qatami told AGBI that the market is still at its peak.
“We have not come down from this real estate cycle peak, and I don’t see it happening very soon, until and unless we have more and more supply into
the market.”
“The market is not slowing down,” he said, adding that he expects more supply to come in over the next two years, when things will then “more affordable”.
Mohammed Feras, associate vice-president of Dubai Festivals and Retail Establishment, told AGBI earlier this year that his organisation was working hard to “change the perception about Dubai that it is very expensive.”
Feras said the “affordable” side of the retail offering in Dubai was an untapped market, and there was a recognition that efforts needed to be made to bring in more affordable brands: “Obviously, there’s still a gap to be bridged, but we are working towards that and we want that to happen as soon as possible.”
For a detailed perspective on the property market, visit: Qatar - Real Estate Review Q3 2024
