Dubai more expensive and less competitive in 2008
Posted on 08 July 2009 with no comments from readers
The Mercier Cost of Living Survey is the ultimate in urban machismo. Roaring up the charts from 52nd in 2007 to number 20 last year can bee seen as quite an achievement for Dubai: the more expensive a city becomes the higher the world values it.
But then there is another side: pity the poor long-term residents whose salaries are relatively stable and who have to pay higher prices and face an influx of high-spending guests driving them out of the better homes and restaurants.
Bad competitiveness
Also worrying is the impact on the business economics of the city: as prices rise it becomes less competitive as a base for business. All the more important for a global hub city that has to compete directly on costs to attract business start-ups.
However, such a leap up the cost-of-living charts is also the sort of sudden progress that marks a bubble economy heading for a fall. The economic slump in Dubai since the global financial crisis hit last year has been particularly deep, with house prices only falling further in Latvia.
And given that rents are the largest component of the cost-of-living in Dubai the implications of plummeting rentals for the 2009 cost survey are clear: Dubai is going to rapidly become a much more competitive base for global business in 2009.
Faster recovery
The speed of this turnaround is a reason to be optimistic about a V-shaped recovery for Dubai, perhaps. This is the benefit of an open and free-market economy. It reacts to changes in circumstances very fast, and that sets a city up for a quicker recovery.
Other Gulf cities also felt the oil boom effect in 2008 on the cost-of-living ranking: Abu Dhabi jumped from 65th to 26th; Kuwait City from 94th to 77th; Bahrain from 112th to 82nd; Riyadh from 119th to 90th.
However, these rankings are all relative and it is not as though other cities around the world are not also experiencing deflation in costs this year. But the inflation of costs in the Gulf in the past two years was particularly marked and so this slowdown is likely to appear all the more dramatic in 2009.
no Comments posted by readers:
I’m in California now and retail sales are beyond horrible. I have been here for a few weeks now. One can easily see that retailers are suffering here in California where I am at but at the same time one can see that prices are down and bargains are up. From a consumers point of view the US is now a bargain for those looking to shop unlike Dubai where prices at retail shops are still crazy high. Shopping centers here are now giving tenants 30-60% off rental rates which is good. I think Dubai’s Malls need to do the same to increase competitiveness.
Hi Peter.
As housing represents so much of living costs it should be a massive turnaround over the coming year but will it be enough? I’m no Cassandra but honestly believe Dubai is finished, without the skill set or the vision to extricate itself from this mess. Moving house this week, the evidence was startling. Hordes of empty properties (still too expensive but in the absence of funding costs, left empty until providing some imaginary yield for the owner) Malls half full with barely a shopping bag in sight’ The appalling inner city blight of what was once Jumeirah 1; now a mound of rubble with hundreds of houses empty or half demolished. A 2km stretch of sewage in the sea yesterday running from Wollangong Beach, past DOSC and almost to Jumeirah Beach Park.
I doubt competitiveness is just around the corner bit even if it were, I wonder if things have just gone too far?
Stephen, I don’t think an entrepreneurial hub city is ever finished but it certainly has to reinvent itself, and that might well be a painful process.