Higher expenses turning the tide for life in the UAE?

Yes, Kermit is holding Euros, but if it were Dirhams, that would be a close depiction of what I look like when I go shopping these days… pretty shocked. 

Since we moved to Abu Dhabi in 2013 things have definitely changed. Life has gotten more expensive and there is certainly a move towards making the Emirates less of a tax-free haven, but a country that is somewhat supported by moneys collected from its residents and citizens. Which, I guess, is a natural evolution. In comparison with what you would pay in taxes in other countries, it is still very low, but if you are looking to move to the UAE you may want to do your reading on this before you settle on that benefits package.

Here are some of the key areas in which we have noticed the biggest price hikes since 2013:

Food costs

We eat vegetarian and when we moved here in 2013 we paid approximately 220 AED per week for groceries to feed the two of us. Now, we pay 400-500 AED per week. Same shopping list. Same grocery chains.

Rent

Housing has always been expensive in the UAE in my books. The impact on your wallet is even greater, because you have to pay a whole years rent up front, as well as a security deposit and the fee of 5-7k for the property agent who showed you the apartment. In 2013 the 5% rental cap was removed, resulting in ridiculous raises in rent (approx 20% in some areas of Abu Dhabi!). This forced us, and many other people to move annually, to avoid unreasonable increases in rent. In 2016 the 5% rental cap was suddenly reinstated, but many landlords still tried to ask for more. During 2016, as various sectors cut costs (and jobs), the media were reporting a significant drop in rent. I only know of very few landlord who might have lowered their rent, or kept it constant from 2016 to 2017, and although places may be advertised at a lower cost this doesn’t mean they exist. Always take the property prices that are advertised with a pinch of salt, and a ++.

Fuel

Fuel has also increased, as prices were hiked on a monthly basis throughout 2016. This was not only due to the changing oil prices, but also due to the UAE cutting down on fuel subsidies. It’s still much cheaper than in Europe though, so I am not complaining 🙂

Water & Electricity 

Prices are being raised by 20-35% for expats and citizens this year, 2017. That’s not a small price increase. Thankfully the cost was initially low, but you still feel the pinch in your wallet. We live in a small 2 bed apartment and only ever use the air-conditioning when it goes over 33 degrees C in the house. Our friends, with 5 bedroom villas, constant air-conditioning to 18 degrees throughout the house, a sprinkler system for their backyard, and a swimming pool, are suffering a much more severe consequence as you can imagine.

Eating Out & Drinks

Most restaurants and bars are located within hotel complexes in the UAE, and if you want to eat or drink here, you now pay additional charges on your bill. We are now at 10% service charge, 6% tourism fee, and 4% municipality fee in Abu Dhabi – i.e. 20% on top of you bill, not including the tip. If you stay in a hotel you will also face additional costs: a municipality fee has also been added to hotel stays(4% on your bill + 15 AED per night per room).

Municipality Fee

After the law on this was passed in 2016, it is finally being introduced. From now on 3% municipality charge will be added to our monthly water/electricity bill, which needs to be paid by the tenant. That in itself is not a problem in my eyes, but the fact that we are also being asked to back pay this fee to February 2016, when this law was passed, in one lump sum, is not such a nice surprise. Depending on your rent, that will be a significant amount of money.

Coming Soon: Value Added Tax of 5%

It was announced that in January 2018, a value added tax of 5% will be introduced. It will be added to electronics, smart phones, cars, jewellery, watches, eating out, and entertainment. I believe the fact that it adds another 5% on eating out and entertainment will affect the expat community.

My Verdict

For us, it still makes sense to be here at this time, but things are definitely changing, slowly but surely. I completely understand that the UAE has to start diversifying their revenue to run their country and it is no surprise that these changes are being implemented – it is the smart thing for them to do. So far, these changes are definitely affected my spending habits though, and determine where we can afford to rent.

If you are currently doing the maths of “should I or shouldn’t I move to the UAE”, I suggest you read up on these topics and include them in your calculations, to determine what your salary and benefits package should look like to support your lifestyle. One topic I did not cover here are school fees. Kindergarden and schools can cost a fortune, and some employers do not pay benefits towards these fees, or are in the process of implementing limitations on them. For everyone with kids, this is also an important number to factor in.

 

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