Hi, Sunil here to discuss the cost of living in Dubai...

It’s very true that you can probably get a better looking compensation package when you take up a job opportunity in Dubai.

This sounds even more attractive when you factor in the fact that Dubai does not tax your income.

Sounds excellent doesn’t it?

Don’t be so quick to answer that.

When I asked a friend who had recently moved to Dubai for a financial services job, he said “yea you make 20% more but you end up spending 30% more”. I laughed so hard because I know how true this can be.

That said, you don’t have to spend that much when you live in Dubai. Many people want to and choose to in order to “fit in” the Dubai lifestyle. However, you can choose not to be a part of all the lavish glamour and all night in and night out.

I am not saying don’t enjoy yourself. In fact Dubai is built around entertainment and your enjoyment. Do it in moderation however unless you don’t mind breaking the bank. I am writing this discussion in response to several requests via email and questions pertaining to the cost of living in Dubai.

So as Dubai becomes more popular amongst foreigners (especially skilled and talented workers), it is experiencing economic growth and growth in population. Like any other country, it is also prone to inflation and other factors any economy is exposed to.

Cost of Living in Dubai vs. London

Generally speaking though, the cost of living in Dubai is pretty high. Higher than the US at least. I still think living in downtown London is more expensive but soon Dubai will erase that fact as well.

This is because the standard of living is continuing to increase in Dubai. And when I say standard, I mean people are wining and dinning more. There are more gadgets in Dubai homes and cars than I bet in Japan and China.

Why? For the obvious reason of no taxation. Dubai doesn’t tax personal income and therefore people are left with more to spend “at the end of the day”. So what do they do with the extra discretionary cash? They spend it. They go out and have a good time.

Expect Dubai’s cost of living to increase as its current population of 1.3 million or so (2007) is estimated to more than double by 2010.

Cost of Living in Dubai in Inflated Significantly by Rents

Rents in Dubai are sky high. This will be your single largest expense of living in Dubai. Dubai property values are out of control and renting a property in Dubai is not cheap.

Apparently the housing is still quite limited (so does the government say) and for that reason the simple economic equation has driven rentals and property values off the roof. The equation being “supply = demand” of course.

Despite the government’s attempt to “cap off” rental increases, landlord have and are continuing to increase rental charges. This has shot up the cost of living in Dubai significantly, especially since 2006. The last I checked rents were up close to 70% in a 2 year span.

For those who want to buy, Dubai property values make it a difficult task. And even if you can afford to buy, there simply aren’t enough units built and ready to move into yet (2008) so you will have to rent in the mean time.

Read more about real estate in Dubai here

Leisure Expense

Guess what ranks second highest to your cost of living in Dubai? Not your car. Not gas either. It is your wine and dine time. Leisure and socializing expenses are the second highest to rents as it pertains to cost of living.

The City is designed to make you open your wallet wide and often. Many professionals go out after work almost every night. Such is just the culture. Everyone is out and about meeting and networking.

People dine out quite frequently as well. See Dubai is a very young place and most of the younger folks enjoy all these activities. It is no different from New York or Chicago if you think about it.

Other Expenses

Some of the other expenses include your utility bills at home, your car, insurance, fuel, healthcare, dry cleaning, cabs and schooling for kids. None of these are that expensive, but they all add up like anywhere else. These are mostly comparable to the West however.

Healthcare costs are quite high though as Dubai is just now in the process of establishing a solid healthcare infrastructure. Food, clothing and electronics are all also comparable to the West. If anything they are slightly cheaper because of Dubai’s tax and tariff laws.

When I went to Dubai early in 2008 the first thing I saw at the Dubai International Airport is a huge banner that said “Dubai – The Healthcare City”. I studied up a bit and learned that Healthcare is Dubai’s latest and most important focus right now. I would expect healthcare in Dubai to get better and cheaper in the future.

I am sure you are thinking of other expenses that I have not included. This certainly isn’t a comprehensive list. Add what comes to mind and you can see how things can get quite expensive. There is no social security or other government program in Dubai to help you out either. You are on your own; as is everyone else.

Tips to Soften Your Cost of Living in Dubai

The only way you can really live in Dubai as a resident is if you are employed locally or buy a property in Dubai. If you are buying a property in Dubai I am assuming you have enough money to be just fine. And even if you don’t, I am sure you have spent enough time doing your research and due diligence as to know what to expect.

This sub-section is more for you if you are planning to relocate to Dubai for a job opportunity as many others are. I strongly recommend you negotiate a salary package to include subsidies for certain living expenses.

The first thing I recommend you try to get is a housing allowance. This is becoming a common practice and many employers even advertise their openings as including housing. They might not pay for the entire annual rent, but you can probably get them to chip in 50% or so.

There is no way an employer would pay for your leisure activities so focus on negotiating having them chip in on your monthly utility bills. These can get quite high when living in Dubai.

Other negotiable items are fuel costs, your vehicle, trips (tickets) back home to visit family, medical and health insurance as well as schooling costs for your kids.

Everything really boils down to your skill-set, the demand for your services and then negotiating skills. Everyone negotiates a different package and yours will depend on how you head your discussions with your employer.

One More Cost Cutting Tip

If all else fails and you can’t get as much as you hoped for from your negotiations, consider sharing a “flat” with another family or couple. Take control of your social life and be cognizant of your budget and spending ability.

This means less nights out, less dining in fancy restaurants and less gadgets at home and in your car. Maybe you can consider a Honda instead of a Mercedes or BMW? Either way you know exactly what to do.

But see most people that move to Dubai go to experience the lifestyle. I’ve heard so many say they want to do it for a year or two while they are young. Many often get addicted and magnetized. They just never leave the place.

Tough Balance

Balancing your cost of living in Dubai can be a tough task. You want to experience the lifestyle and live the Dubai experience while not having to sacrifice your financial progress.

The best way to do this is to become well informed before considering a move. After you have the knowledge, look for a job and negotiate accordingly. Finally, keep in mind the tips mentioned above. Where there is a will there is always a way! Living a good comfortable in Dubai is definitely possible (just look at the many who have packed up and gone there).

I have no doubts that with the right approach you too can enjoy the Dubai lifestyle that involves luxury wining and dining, nightly social outings, beach clubs, golf clubs, bars, nightclubs, concerts shopping and much more.