Dubai ranks as 36th most expensive city

Nikhail Lohade
Emirates Today, August 11 – There is a growing concern in the business community that Dubai may out-price itself as a competitive location to set up base, with the city featuring among the most expensive in the world in yet another survey.

Switzerland-based UBS’s 2006 study Prices and Earnings found that Oslo, London, Copenhagen, Zurich and Tokyo are the world’s five most expensive cities in relation to a standardised basket of 122 goods and services that is weighted in favour of Western European consumer habits. Dubai ranked 36 on the list, which featured 71 cities.

But the study does not include the cost of housing and that is the biggest worry for the emirate, an analyst said.

"Inflation is a concern in Dubai and rents are the biggest component to inflation here, so the picture could be bleaker if the rent component was included," said Dr Eckart Woertz, programme manager – economics, Gulf Research Centre. "Dubai is growing rapidly, but still does not compare to countries in the top bracket on counts like infrastructure, schooling and even cultural activities." In this scenario, wage earners could rethink their move to Dubai when they compare the cost of living to what they earn in the emirate.

"This will also affect businesses with some companies already not preferring to send people with families to Dubai. Eventually, a lot of these companies will look at alternate locations to set up their businesses," Dr Woertz added.

But Dr Nasser Saidi, chief economist at the DIFC, believes that it is difficult to make international compar isons as one cannot look at the same basket of services in a quantitative study that does not bring out the quality and diversity offered in different countries.

"What is in favour of Dubai is that the cost of services is still lower and a huge pool of international talent is available because of the open labour market policy here," said Dr Saidi, adding that concerns over the rising cost of housing will be short-lived.

"The rise in cost of housing that we have seen in the recent past is exceptional.The number of people who came in were much higher than the existing stock and hence led to a rise in rents. But I think that this is temporary and part of it was pre-emptive. A strong supply will eventually level off these high rents and we will reach an equilibrium soon – probably by the end of 2006 and in the first two quarters of 2007." The UBS study found that the highest wages are in Scandinavia, Switzerland and the US, with Dubai coming in at 34.

Zurich and Geneva, followed by Dublin, Los Angeles and Luxembourg lead the pack in purchasing power with Dubai ranked 29 on the list.