Tuesday, July 29, 2008

Abu Dhabi and Dubai among world’s most pricey cities

Abu Dhabi and Dubai among world’s most pricey cities
Vivian Salama THE NATIONAL Last Updated: July 26. 2008 8:26PM UAE

ABU DHABI // Abu Dhabi and Dubai remain among the world’s most expensive cities, though at a lower ranking than last year, a new cost-of-living survey has revealed.

This year Dubai ranks as the 52nd most expensive city, down from 32nd place last year, while the capital is number 62, down from 45th, according to Mercer, the international human resources company that conducts the annual survey. The cities rank second and third in the Middle East respectively, behind Tel Aviv, which ranked 14th. Conversely, a number of European cities have risen in the ranks and dominate the top of the list.

Yvonne Traber, a principal and research manager at Mercer, attributed much of the change to exchange rate fluctuations. “Current market conditions have led to the further weakening of the US dollar which, coupled with the strengthening of the Euro and many other currencies, has caused significant changes in this year’s rankings,” she said.

The survey, covering 143 cities in six continents, is designed to help multinational companies and governments determine compensation allowances for their expatriate employees. It charts the cost of more than 200 everyday items, from clothing and footwear, to groceries, personal care needs, transport costs and dining out, as well as the cost of renting a high quality two-bedroom furnished flat.

The cost of living in many European cities has grown more rapidly than in Abu Dhabi and Dubai because, in addition to inflation, the cost of goods is denominated in euros, which have strengthened against the dollar.

On the other hand, soaring oil prices and the rapid growth of GCC economies has fuelled inflation in the Middle East this year at a faster rate than in Europe and the US.

UAE inflation accelerated to a 20-year high of 11.4 per cent last year and will rise slightly to 11.8 per cent this year, a Reuters poll last month showed. Food, beverage and tobacco accounted for 11 per cent of that rise and, according to the Emirates Consumer Protection Society, a division of the UAE Ministry of Economy, food inflation could rise as high as 40 per cent this year.

“The saying goes that Emirates Hills is now more expensive than Beverly Hills,” said Mary Nicola, an economist with Standard Chartered Bank in Dubai. “Day-to-day expenses in terms of groceries and such have become more expensive here.”

Soaring rent prices have also become a burden for UAE residents. A report released by the Abu Dhabi Department of Planning and Economy (DPE) estimated that rents during the first quarter alone increased by 18 per cent.

A recent survey found that rents in the capital had risen by an average of 49 per cent since June of last year and, in some cases, almost doubled since the beginning of the year despite a Government cap of five per cent. The survey by Asteco, a UAE property services company, found that rent for two-bedroom apartments in the Muroor and Tourist Club areas increased by 80 per cent or more in the 12 months from last June.

The annual rent for two-bedroom apartments ranged from Dh180,000 (US$49,000) to Dh194,400 in Hamdan Street, on the Corniche, in the Tourist Club area, Salam Street, Muroor and Khalifa Street. The average rent for one-bedroom apartments throughout the city ranged from Dh110,000 to more than Dh140,000, depending on the quality and location of the unit, the survey found.

In comparison, the UK estate agent Foxtons is offering two-bedroom flats in the fashionable districts of Kensington or Notting Hill for £2,167 (Dh15,843) a month, or Dh190,838 a year. A similar two-bedroom apartment in the Financial District of New York was advertised by the CitiHabitats agency for $4,350 (Dh15,977) a month, or Dh192,000 a year.

Ms Traber said that multinational companies were attracted to countries with a high rate of economic growth. “Companies may assign high priority to expansion in these economies but may have to deal with inflationary pressures due to competition for expatriate-level housing and other services,” she noted.

Ms Nicola said inflation would have an impact on attracting new people to the GCC.

“Businesses trying to set up shop and attract new talent have to fork out more money,” she said.

Worldwide, Moscow ranked as the world’s most expensive city for the second year running, followed by Tokyo, and London. The only US city in the top 50 is New York, which is down from 15th place last year to 22nd this year, due to the weakness of the dollar.


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