Life in Dubai - A well written piece from the Gulf News
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Life in Dubai - A well written piece from the Gulf News
Counting the cost
By Andrew Shouler, Editor, Business Commentary
For many people, especially from afar, the UAE still has a magical appeal as a land of wealth and opportunity. Dubai's glittering skyline provides the cutting edge for that emotion.
This country's bid to become the focus of activity and attention between the international time zones of the Far East and Europe, completing a four-cornered set of centres globally with, for instance, New York, Shanghai and London, entails a whirl of head-spinning growth. That story continues.
On the ground, however, especially among the expat population, the magic may be wearing off somewhat, and another story may be developing. Growth very often produces inflation, and it is beginning to take its toll.
YouGov's data suggest that living standards are not only failing to match the breathless pace of change, but in a high proportion of cases are receding.
Inflation as experienced at street level by significant swathes of those who have come to spend some portion of their lives and save a pot of money for the future seems to be running at three or four times the rate at which pay packets are swelling.
Consequently, while the country's ambitions soar, the immediate horizons of those participants actually are shrinking.
It is important not to overdramatise the survey's findings, although the sample of over 700 interviewed, reflecting the country's demographics, is intended to be representative of the broader picture. The numbers do, however, speak for themselves.
The results confirm, as YouGov's Caroline Elford puts it, "a large increase in living costs in a relatively short space of time". The key data are portrayed in the graphics below.
In the past 12 months, average price increases were reported, across key areas of expenditure, in the range of 20-30 per cent namely in accommodation (27 per cent), foodstuffs (20 per cent), healthcare (18 per cent), education (20 per cent) and transportation (25 per cent).
Tightening
Meanwhile, pay growth lags a long way behind. While it is difficult to be exact, primarily because responses are grouped in data ranges, a rough calculation of the weighted average puts income growing by around seven per cent. Remarkably, by their own testimonies, 39 per cent received no pay increase over the last year, and three per cent even a decrease.
Naturally, a certain amount of belt-tightening is taking place. Dwelling arrangements have come under considerable pressure, with 44 per cent of the total surveyed reporting that living costs have already contributed to a decision to move, to share housing or to send the family away, while 65 per cent have considered such options. It is worth noting that 69 per cent live in rented accommodation.
Obviously, savings patterns also take a severe knock. On average, roughly nine per cent of income is saved. Yet, in the case of 41 per cent of respondents, apparently, no part of income is saved, seriously undermining the motivation to stay for those who consider their ultimate home is elsewhere.
YouGov refers to a social divide emerging, as those on lower incomes are disproportionately affected, both in terms of housing cost hikes and diminished savings. It also points to significant numbers of expats considering leaving the UAE, with 35 per cent of those departing citing rising costs as one of the key reasons.
Otherwise, taking the 'bottom-line' criterion, there is remarkable similarity across nationalities, gender and age with respect to savings ratios relative to income (although the tendency to save is, of course, not quite the same as the ability).
Meanwhile, not mentioned in the survey's analysis is the impact of the UAE dirham declining internationally (in conjunction with the US dollar), which, if it continues, weakens the value of repatriated earnings. Of course, if you are not saving anything at all, it doesn't matter what the exchange rate is; zero is zero in anybody's money. But it's another, critical angle which does not help ease the mind.
Perhaps the pending supply of new property will reverse the rising cost tendency. Moreover, if some people are leaving, and others are not so tempted to come, the demand side of that equation may also kick in. A concern there must be that such a reversal is not overdone, mirroring the recent plunge in the stock market.
Yet inflation in other categories clearly also applies, at fairly consistent levels. It certainly seems there is systemic pressure, which needs to be alleviated, preferably in a gentle way not damaging to the UAE's continuing development.
Maintaining competitiveness
Abdullah Sharafi, Economist and Executive Director of Gerab Ind. Enterprises
"If we are talking about a year from mid-2005 to mid-2006 then a 20 per cent inflation rate seems to be quite likely.
Prices have been on the rise in many areas - fuel, transportation, household goods, foodstuff, and recreational services.
The cost of borrowing has been increasing, and so has the prices of homes and rent.
"There is a threat to economic progress from inflation. If the value of the dirham does not decline against the currencies of countries the UAE exports to, then our exports become less competitive. Our cost of doing business increases, so businesses choose between keeping their operations in the country or taking it out. Furthermore, we make less profit to stay in the business.
"A high rate of inflation also discourages savings, if the interest rate on deposit is less than the inflation rate. In fact, it encourages excessive borrowing, because the money to be repaid would be worth less in future. Cheap money further pushes up prices of commodities, properties, stocks, and other services, as conspicuous consumption and speculation pushes up prices.
"Whereas living standards may have improved in Dubai, the cost of living is excessively high. Already we as a company are setting up units in less expensive countries to perform some of our non-core operations so as to contain the increasing cost of adding new staff. Also, we are experiencing lack of interest from qualified people who are familiar with the cost of living conditions in Dubai.
"With respect to policy measures, a revaluation of the dirham would slow inflation down, but then it would have other kind of negative implications on the economy and the government treasury.
"I feel that opening up the entire property market to foreign investors, and not just certain enclaves that are marketed by a small number of people, would bring more sense into the property market.
"A third thing is to slow down the rate of growth. This could mean postponing some of the projects, or just extending the time it takes for their implementation."
Separating fact from fiction
Peter Riddoch, Chief Executive, Damac Properties
"With most of the information circulating being anecdotal, it is difficult sometimes to separate 'fact' from 'fiction'.
"However, it would seem that some landlords of older buildings in Dubai, for example, have in recent months substantially increased rents, reportedly by over 50 per cent this year. That does seem excessive, particularly when many of these buildings will have been 'paid for'.
"Employers, whilst conscious of the strain on employees, cannot just chase up salaries, since this would set off an even greater inflationary spiral, which could then make Dubai uncompetitive. Increases in salaries will have to be matched by increases in productivity to allow 'Dubai Inc.' to remain competitive."
Keeping the right calibre
David Thatcher, Principal, Career Partners
"Unfortunately, Dubai has inherited a legacy of hiring to the cheapest price, which must change if it is to attract the right calibre of people.
"Spiralling property rents on commercial and domestic premises, inflation as well as infrastructure problems have created a more stressful environment.
"Considering that for many people over 30 pe cent of the monthly income is paid out in rent, and inflation continues to increase the cost of living, many have less money to spend, and for some repatriation is becoming a practical alternative to questionable career prospects and increasing expense.
"This impacts job market fluidity and creates a discontented and demotivated workforce."
By Andrew Shouler, Editor, Business Commentary
For many people, especially from afar, the UAE still has a magical appeal as a land of wealth and opportunity. Dubai's glittering skyline provides the cutting edge for that emotion.
This country's bid to become the focus of activity and attention between the international time zones of the Far East and Europe, completing a four-cornered set of centres globally with, for instance, New York, Shanghai and London, entails a whirl of head-spinning growth. That story continues.
On the ground, however, especially among the expat population, the magic may be wearing off somewhat, and another story may be developing. Growth very often produces inflation, and it is beginning to take its toll.
YouGov's data suggest that living standards are not only failing to match the breathless pace of change, but in a high proportion of cases are receding.
Inflation as experienced at street level by significant swathes of those who have come to spend some portion of their lives and save a pot of money for the future seems to be running at three or four times the rate at which pay packets are swelling.
Consequently, while the country's ambitions soar, the immediate horizons of those participants actually are shrinking.
It is important not to overdramatise the survey's findings, although the sample of over 700 interviewed, reflecting the country's demographics, is intended to be representative of the broader picture. The numbers do, however, speak for themselves.
The results confirm, as YouGov's Caroline Elford puts it, "a large increase in living costs in a relatively short space of time". The key data are portrayed in the graphics below.
In the past 12 months, average price increases were reported, across key areas of expenditure, in the range of 20-30 per cent namely in accommodation (27 per cent), foodstuffs (20 per cent), healthcare (18 per cent), education (20 per cent) and transportation (25 per cent).
Tightening
Meanwhile, pay growth lags a long way behind. While it is difficult to be exact, primarily because responses are grouped in data ranges, a rough calculation of the weighted average puts income growing by around seven per cent. Remarkably, by their own testimonies, 39 per cent received no pay increase over the last year, and three per cent even a decrease.
Naturally, a certain amount of belt-tightening is taking place. Dwelling arrangements have come under considerable pressure, with 44 per cent of the total surveyed reporting that living costs have already contributed to a decision to move, to share housing or to send the family away, while 65 per cent have considered such options. It is worth noting that 69 per cent live in rented accommodation.
Obviously, savings patterns also take a severe knock. On average, roughly nine per cent of income is saved. Yet, in the case of 41 per cent of respondents, apparently, no part of income is saved, seriously undermining the motivation to stay for those who consider their ultimate home is elsewhere.
YouGov refers to a social divide emerging, as those on lower incomes are disproportionately affected, both in terms of housing cost hikes and diminished savings. It also points to significant numbers of expats considering leaving the UAE, with 35 per cent of those departing citing rising costs as one of the key reasons.
Otherwise, taking the 'bottom-line' criterion, there is remarkable similarity across nationalities, gender and age with respect to savings ratios relative to income (although the tendency to save is, of course, not quite the same as the ability).
Meanwhile, not mentioned in the survey's analysis is the impact of the UAE dirham declining internationally (in conjunction with the US dollar), which, if it continues, weakens the value of repatriated earnings. Of course, if you are not saving anything at all, it doesn't matter what the exchange rate is; zero is zero in anybody's money. But it's another, critical angle which does not help ease the mind.
Perhaps the pending supply of new property will reverse the rising cost tendency. Moreover, if some people are leaving, and others are not so tempted to come, the demand side of that equation may also kick in. A concern there must be that such a reversal is not overdone, mirroring the recent plunge in the stock market.
Yet inflation in other categories clearly also applies, at fairly consistent levels. It certainly seems there is systemic pressure, which needs to be alleviated, preferably in a gentle way not damaging to the UAE's continuing development.
Maintaining competitiveness
Abdullah Sharafi, Economist and Executive Director of Gerab Ind. Enterprises
"If we are talking about a year from mid-2005 to mid-2006 then a 20 per cent inflation rate seems to be quite likely.
Prices have been on the rise in many areas - fuel, transportation, household goods, foodstuff, and recreational services.
The cost of borrowing has been increasing, and so has the prices of homes and rent.
"There is a threat to economic progress from inflation. If the value of the dirham does not decline against the currencies of countries the UAE exports to, then our exports become less competitive. Our cost of doing business increases, so businesses choose between keeping their operations in the country or taking it out. Furthermore, we make less profit to stay in the business.
"A high rate of inflation also discourages savings, if the interest rate on deposit is less than the inflation rate. In fact, it encourages excessive borrowing, because the money to be repaid would be worth less in future. Cheap money further pushes up prices of commodities, properties, stocks, and other services, as conspicuous consumption and speculation pushes up prices.
"Whereas living standards may have improved in Dubai, the cost of living is excessively high. Already we as a company are setting up units in less expensive countries to perform some of our non-core operations so as to contain the increasing cost of adding new staff. Also, we are experiencing lack of interest from qualified people who are familiar with the cost of living conditions in Dubai.
"With respect to policy measures, a revaluation of the dirham would slow inflation down, but then it would have other kind of negative implications on the economy and the government treasury.
"I feel that opening up the entire property market to foreign investors, and not just certain enclaves that are marketed by a small number of people, would bring more sense into the property market.
"A third thing is to slow down the rate of growth. This could mean postponing some of the projects, or just extending the time it takes for their implementation."
Separating fact from fiction
Peter Riddoch, Chief Executive, Damac Properties
"With most of the information circulating being anecdotal, it is difficult sometimes to separate 'fact' from 'fiction'.
"However, it would seem that some landlords of older buildings in Dubai, for example, have in recent months substantially increased rents, reportedly by over 50 per cent this year. That does seem excessive, particularly when many of these buildings will have been 'paid for'.
"Employers, whilst conscious of the strain on employees, cannot just chase up salaries, since this would set off an even greater inflationary spiral, which could then make Dubai uncompetitive. Increases in salaries will have to be matched by increases in productivity to allow 'Dubai Inc.' to remain competitive."
Keeping the right calibre
David Thatcher, Principal, Career Partners
"Unfortunately, Dubai has inherited a legacy of hiring to the cheapest price, which must change if it is to attract the right calibre of people.
"Spiralling property rents on commercial and domestic premises, inflation as well as infrastructure problems have created a more stressful environment.
"Considering that for many people over 30 pe cent of the monthly income is paid out in rent, and inflation continues to increase the cost of living, many have less money to spend, and for some repatriation is becoming a practical alternative to questionable career prospects and increasing expense.
"This impacts job market fluidity and creates a discontented and demotivated workforce."
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Andrew Shouler and the newspaper ought to be congratulated for being able to spell out what otherwise is being kept under cover by the government officials and the media in general. This is really applicable across "the expatriate" Gulf. If Dubai is the clear "leader", Abu Dhabi, Doha, Bahrain, Muscat and Saudi more recently are catching up.
However, and despite everything written, the Gulf is still an opportunity for very many to upgrade their life-savings, styles, etc.. This, from jobless guys to those looking for bonded type-ratings, early-retired pilots looking for something extra, etc.. Single and married guys with no kids have a brighter chance, etc..
Everyone has the right for a change. Some make it really better and many get disappointed shortly after arriving. It's a matter of opportunity to the dismay of those trying hard(er) to see their own T&Cs improved from levels where others think they wished that had that (or even less).
David Thatcher, Principal, Career Partners points out:
what owners and their managers fail to see with catastrophic consequences as slowly emerging now.
That's life. "Every case is a case". Pure rhetoric some may say but it's widely applicable worldwide.
My motto continues to be Virgins' keep discovering until you find better
(and always better)...
Off for an early start. Stay safe and fly safely
However, and despite everything written, the Gulf is still an opportunity for very many to upgrade their life-savings, styles, etc.. This, from jobless guys to those looking for bonded type-ratings, early-retired pilots looking for something extra, etc.. Single and married guys with no kids have a brighter chance, etc..
Everyone has the right for a change. Some make it really better and many get disappointed shortly after arriving. It's a matter of opportunity to the dismay of those trying hard(er) to see their own T&Cs improved from levels where others think they wished that had that (or even less).
David Thatcher, Principal, Career Partners points out:
unfortunately, Dubai has inherited a legacy of hiring to the cheapest price, which must change if it is to attract the right calibre of people
That's life. "Every case is a case". Pure rhetoric some may say but it's widely applicable worldwide.
My motto continues to be Virgins' keep discovering until you find better
(and always better)... Off for an early start. Stay safe and fly safely
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So who's making the $$
As stated above costs are going up BUT employers will not increase wages to keep up with inflation especially rent.
Our family is definitely living in Dubai now with negative cash flow.
So needless to say who's pocket is the $$$ going into. Yes you guessed........!
EK record profits.....did we get record profit share.......not!
Our family is definitely living in Dubai now with negative cash flow.
So needless to say who's pocket is the $$$ going into. Yes you guessed........!
EK record profits.....did we get record profit share.......not!
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One line of thought is that the average labourer from Asia, is not only turning down jobs here, but leaving now because salaries are not compatable. I would say here is a problem that may spiral.
Grandpa Aerotart
If you're interested in an opinion from someone who is in and out of DXB regularly over the last several years, but doesn't live there and is therefore disspasionate?
Dubai is a house of cards set to collapse...like the recent stock market 'correction'.
Manic construction of high end expat style accom and equally manic lack of traffic infrastructure coupled with, as quoted in the Gulf News, 40-60% of respondants downsizing, going home, sending families home etc, means a bubble set to burst BIG TIME.
I would suggest it won't be long before supply exceeds demand by such a large margin that it will reverberate right across the banking sector with huge loan defaults etc. It'll make the 40% fall in the stock market look pale by comparison. You'll be able to dictate how much you pay in rent. To purchase property there is just lunacy.
The only way this won't happen is for the expat population in DXB to double in the next few years...that WILL NOT happen.
Expect to see a lot of deserted building sites with unfinished monuments to greed dotting the landscape...not a good look.
Dubai is a house of cards set to collapse...like the recent stock market 'correction'.
Manic construction of high end expat style accom and equally manic lack of traffic infrastructure coupled with, as quoted in the Gulf News, 40-60% of respondants downsizing, going home, sending families home etc, means a bubble set to burst BIG TIME.
I would suggest it won't be long before supply exceeds demand by such a large margin that it will reverberate right across the banking sector with huge loan defaults etc. It'll make the 40% fall in the stock market look pale by comparison. You'll be able to dictate how much you pay in rent. To purchase property there is just lunacy.
The only way this won't happen is for the expat population in DXB to double in the next few years...that WILL NOT happen.
Expect to see a lot of deserted building sites with unfinished monuments to greed dotting the landscape...not a good look.
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Originally Posted by EK Pilot
YouGov refers to a social divide emerging
Originally Posted by EK Pilot
Unfortunately, Dubai has inherited a legacy of hiring to the cheapest price
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The real cost of living and working in DXB is masked by Incomplete Inflation Data
Interesting article here from the The latest 'Middle East Focus' from Standard Chartered Bank includes a raised UAE forecast for real GDP growth of 10.2 per cent for 2006
Acknowledges that IMF forcast for inflation in 2005 was 8 % BUT that did not include 30.1 per cent residential rent rises
The article ends by acknowledging that a correction in the Real estate sector is possable
Acknowledges that IMF forcast for inflation in 2005 was 8 % BUT that did not include 30.1 per cent residential rent rises
Given that the UAE's interest rates are pegged to the US dollar, this implies a negative real interest rate. The IMF forecast for inflation in 2005 was eight per cent, but that did not include 30.1 per cent residential rent rises comparing the first quarter of 2006 with the same three months in 2005.
This is why Standard Chartered Bank's respected economic team does not think a real property crash is likely, although a soggy patch for sales is possible at some stage.
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sal-e
Not a case of not liking it-a case of greed and an ever increasing corruption-just look at the number of SZ demo of workers not getting paid.My rent went up 27% last year-one year after moving in-this year rumours from management that it will go up another 20%.I'm just on the border line of not using savings-I really love it here as do the family but if the Companies dont do something about pay and conditions then there will be an exodus and on a grand scale-no pay rise for me this year either
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The facts Alfred
Sal-e or is it Alfred I like living in the sandpit however many guys are interested in getting the facts rather than emotional responses. Posting links to the local rag gives some sort of credibility rather than plucking a statement from the either.
If you actually lived and worked in Dubai you would know that the cost of living is a topic that is discussed from the guy who sweeps the streets to the guys who run the country and make all the decisions.
there was actually another piece written in todays Gulf News Paper talking about the same article
What you need to realize and this is discussed in the article
So really all these official figures really mean stuff all because they do not include the most costly increases over the past few years which has been sky rocketing rent and housing costs.
When you get to live here in Dubai for some time you will understand.
I've said it once, I'll say it again......LEAVE the UAE for anyone who doesn't like it.
there was actually another piece written in todays Gulf News Paper talking about the same article
What you need to realize and this is discussed in the article
The IMF in early June forecast an inflation rate of 8 per cent in 2005, although it noted that the Consumer Price Index (CPI) does not reflect true price increases as the basket of goods and services does not give weightage to the housing costs and rents realistically.
When you get to live here in Dubai for some time you will understand.
