The UAE has for a long time been considered a major player in the world in tourism as well as business. Expats are attracted to this country because of the tax-free lifestyle and the high standard of living. For decades, the UAE has had a large expat community, one that accounts for at least half of its population. Recent years have seen considerable investments being made in infrastructure in emirates such as Abu Dhabi and Dubai.However, over the last few years an increasing number of expats have found life in the UAE to be more challenging than they expected. Some say that they are almost entirely unable to save any money at all. The ability to save a large part of one’s income has always been a major attraction for expats in the UAE. Is this no longer a factor for the average expat? To answer this, let’s begin by looking at the cost of living in the UAE.
Housing
When living in the UAE, a significant portion of an expat’s budget will have to be allocated to housing. Rental rates will, of course, depend on the location, size and quality of the property. But affordable housing in the UAE is not very easy to find. A 2015 international survey by a property agency based in London found that among 31 international metropolises, Abu Dhabi figured as the second-most expensive.
In a CBRE Residential UK analysis, Abu Dhabi and Dubai emerged in a list of top ten cities in the world with the highest monthly rents. The rental market in Abu Dhabi has extensive waiting lists. In the areas in Dubai that attract expats, the rental costs annually are likely to be around AED 110,000-160,000. Cheaper housing can be found in other areas. Many expats opt for family villas, which are more expensive than apartments.
Utilities
Utility fees are usually not included in the rental costs in the UAE. Expats will need to set up their utilities with the relevant authority in the specific emirate, such as the Dubai Electricity and Water Authority. Utility providers take care of the electricity and water supply, and are also responsible for sewage and wastewater disposal in the emirate.
Water and electricity costs take up the largest portion of the utility bill. There is likely to be a difference in fees for smaller apartments and larger villas, which may have swimming pools or gardens. The average estimated expenditure on water and electricity is likely to be around AED 1,200 each month for a two-bedroom apartment. Electricity bills can shoot up during the summer months when air conditioning is essential.
Many expats with well-paying jobs are able to also afford domestic help, which comes to around AED 3,000 for employing one person. Those who do not require full-time help can opt for hiring occasional assistance, such as a cleaner once a fortnight, who will charge between AED 25-40 per hour.
Transportation
The UAE has an efficient public transport system. Dubai, which is one of the most popular expat emirates, has one of the best public transport systems in the Gulf area. However, many expats will find it more convenient to have their own car. The costs of leasing a mid-range vehicle will amount to a couple of thousand AED per month. This includes insurance and fuel costs.
Expats who opt for public transport will find that the costs are not very high. Buses, water taxis, and the Dubai Metro can be accessed by a day pass, which costs about AED 15. A taxi journey over a short distance will cost about AED 10.
Insurance
In the UAE, expats are not taxed on their personal income. They are also not required to make contributions towards social security or pensions. This goes a long way in reducing expenses while living in the UAE. But expats will need to allocate some amount of their earnings towards retirement.
It is a good idea for expat retirees to consult their social security department in their home country and inquire about the impact that living in the UAE will have on their finances. Working expats should ask about any insurance plans their company gives to employees.
In the UAE, only UAE nationals are eligible for free healthcare. However, the private healthcare facilities in emirates like Dubai are excellent, and visits to a GP or a dentist are fairly affordable, amounting to about AED 500. Additional tests and treatments incur extra costs. Expats should however have proper health insurance coverage in case of accidents or serious medical conditions.
Education
Schooling costs can take up a considerable portion of finances for expat families. Reputable international schools such as the American School in Dubai are particularly expensive, and can cost upwards of AED 100,000 per year in tuition fees. There are likely to be additional costs such as textbooks or extra-curricular activities, which are usually excluded from school fees. Some companies in the UAE have reserved seats at international schools, which are meant for their employees’ children. This makes the admission process easier and the fees are also reduced.
Food
Expats living in Dubai or Abu Dhabi will find that the costs of food and groceries are largely determined by their shopping choices. Buying local produce will keep costs lower. The grocery bill for a single expat each week can come to between AED 250 to 1,000, depending on personal choice.
The UAE has a variety of options when it comes to eating out. One of the cheapest snacks is shawarma, which costs only about five dirhams. An outing to a café is likely to be a lot more expensive; even a coffee can cost AED 15 to 20. The UAE is known for its many high-quality malls. It is possible to dine out at the food courts of any of these malls for as less than AED 100. Restaurants are more expensive and the per person rate can be as high as AED 500.
Is the opulent lifestyle just a dream?
A financial planning company based in Dubai, Guardian Wealth Management, found that even expats who earn lucrative incomes are facing difficulties allocating a portion of their salaries for investment and savings. The study analyzed 3000 Gulf residents, including 2,400 people living in the UAE, and found that three quarters of these individuals are able to set aside less than 20 percent of their salaries for their retirement years. A fifth of them could save only up to 10 percent. It must be highlighted here that these individuals were all employed in well-paying jobs, earning a monthly salary of about Dh40,000 and Dh60,000. Apart from being unable to save for retirement, they are also not able to maintain the lifestyle they expected when they first moved abroad.
If high earners face this problem, those who earn lower wages are likely to suffer even more severely from the same dilemma. Most UAE residents admit that most of their monthly income goes toward living costs, leaving very little for savings. Another detriment is the credit card expenses and personal loans, which most non-UAE nationals continue to pay off. A survey by National Bonds found that half of non-UAE nationals are paying off their personal loans, while 38 percent are paying towards their credit card charges.
According to a survey conducted by YouGov, the top three financial concerns for residents in the UAE are living costs, increasing rental costs and the inability to put aside money for savings and investments. This survey analyzed 1,104 expats living throughout the UAE on their attitudes towards finances, saving, spending and employment security. Almost 17 percent of respondents gave a definite ‘yes’ when asked if they would think about leaving the UAE due to rising living costs, while 33 percent said they ‘probably’ would. Asian expats said their biggest financial concern was the cost of living, while westerners and Arab expats said the soaring rents were their greatest worry. After living costs and rent, food costs, the costs of household items, education expenses and medical expenses were next on the list.
The UAE has changed a great deal over the past few years and expats say that while incomes have remained the same as they were in 2006 or 2007, rents and living costs have shot up. Schooling fees are also a cause for concern for expats with families.
Interestingly, the study brought to light that the worry about high living costs was not restricted to expats. Emiratis too worry about rising expenses, especially school fees, which have greatly increased over time. Students also are feeling the pinch. One Emirati student maintained that she was thinking about moving abroad to study, as housing in her home city of Dubai is too expensive, even though her preferred universities are in Dubai and Abu Dhabi. The only way for students to be able to maintain a lifestyle in a place like Dubai is to take a loan or seek financial help from family.
Another view on this matter is that people living in the UAE residents are used to living luxurious lifestyles, and saving money has not previously figured very highly on their list of priorities. Sometimes expats assume they can live a life of luxury considering there is no tax, but this puts them out of touch with the significance of saving for the future, so that they can continue living a comfortable and opulent life even after they retire.
So, what can expats living in the UAE do to cope with the stagnant incomes and rising costs of living? Firstly, since for the average expat family the largest portion of their income goes towards living expenses, they should make sure they are not spending their money on wasted space. Large three-bedroom villa rentals begin at Dh 80,000 and the costs only increase from there. Opting for a smaller apartment may be a more economical choice.
Since nearly all expats opt for private schooling for their children, they also have to deal with the exorbitant fees at these schools. It’s beneficial if employers can help with schooling costs and expats should attempt to negotiate this in their job contracts. While it may not be possible to avoid the high schooling fees, it is sometimes possible to save on expenses by living closer to the preferred school.
Fuel is cheap in the UAE, but it is not always a good idea to spend money on vehicles for the household. Often, expats own more than two cars, which are used for commuting to the office or driving the kids to school. A good way to save money is to buy one affordable car and avoid the high interest rates on car loans.
Flights may be unavoidable in an expat lifestyle, but expats can save on costs by getting the right credit card and saving up reward points. Planning in advance also helps, as tickets will be cheaper. To further reduce costs, opt for flights with a stopover, as these are cheaper than direct trips.
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