One of the main attractions for expatriates moving to the bright lights of Dubai or Abu Dhabi is the promise of a tax-free income. The truth is that while salaries are very much exempt from tax, money is consumed in a variety of alternative ways to pretty much leave many in exactly the same position they would be (financially not geographically) if they remained at home, only a bit hotter.
According to research published by multi-national institution Friends Provident, a range of higher living costs consume the tax savings for many, leaving expats to wonder where it all went.
Interestingly, the cost of living in Dubai and Abu Dhabi is far cheaper than many other more desirable destinations according to the Economist Intelligence Unit’s Worldwide Cost of Living Survey, however the survey does not take into account two significant areas – the cost of property and the cost of schooling.
EIU Worldwide Cost of Living Survey (Percentile represents how much cheaper cost of living is within the Emirates)
The UAE’s property market and valuation structure has always baffled industry analysts. Prices have bizarrely risen over 60% in the last 12 months in some areas, with landlords looking at the Expo 2020 as some kind of green light to price as they please. Particularly in Dubai, the trouble is the sheer size of the city. While there are many areas which are extremely cheap, they are seen as undesirable due to the terrible traffic flow and general danger represented by commuting 30 kilometres to and from work each morning. So as a result, the Marina, the Palm Jumeirah and JLT remain most popular for expats – and as a result the landlords use this to their advantage.
School costs also rose 9% in the last year, and it is these two factors that tend to eat into any extra money one might feel is at their disposal in the tax-free environment they are so gratuitously invited to feel privileged for.
The UAE is certainly a destination with possibilities for saving and securing some kind of future. Few realistically views the place as a long term residence. There are far too many cultural, legal and religious contradictions to keep one’s sanity for perhaps more than five years, but with financial guidance and advice, there is certainly scope for being able to properly budget and store money away for the future.
If financial planning is an area of expatriate life you feel might be worth considering, contact us and we would be happy to recommend a credible professional operating within the region….