The rising cost of living is the “single biggest factor” for expatriates assessing their future in the UAE, according to experts from Guardian Wealth Management.
Clients from the financial planning firm have voiced concerns over peak school fees, rising food and travel costs, and the introduction of 5% VAT, which has caused annual inflation to rise to 3.41% in Dubai and 3.9% in Abu Dhabi.
“In Q1 of 2018, we have noticed an increase in clients voicing concerns over the rising costs of their outgoings,” said Gemma Frankland, Head of Global Partners at Guardian Wealth Management. “This is particularly troubling for expatriates who have come to the UAE to take advantage of higher wages and save long term.”
A separate study from yallacompare found that over half of UAE residents are at least slightly worried about being able to get by as the cost of living increases. It also found that 43% are less confident about their finances than they were this time last year.
Despite recent reports of individual schools dropping rates, average fees remain high and schools are eligible to increase prices further in September following the publication of the latest KHDA ratings. Schools are allowed to raise fees by a multiple of the Education Cost Index (ECI), which currently runs at 2.4%.
As the rules stand now, this will mean ‘Outstanding’ schools can increase fees by up to double the ECI; ‘Very Good’ schools by up to 1.75 times the ECI; ‘Good’ schools by up to 1.5; and the rest in line with the ECI.
“So ultimately, the better the school the more parents are going to pay. The families we look after always have education at the heart of their financial planning, and with the UAE already having very high costs for private education, this could be a deciding factor for whether some expatriates choose to stay in the Emirates or not after the summer break,” said Frankland.
With the implementation of the 5% Value Added Tax (VAT), Guardian Wealth Management estimate the average monthly outgoings of a family of four have increased by AED 1,700 per month (including rent).
Paul Butler, a UAE-based father three from the UK, told the financial advisory firm: “School fees for our elder two boys amount to AED 160,000 per annum, and this is due to increase next term. This is a sizeable amount of money, what with the cost of living ever increasing. It’s meant we have had to cut back on most of the lifestyle choices we made when we came. So life can be a lot less fun nowadays, and we find ourselves asking the question is it all worth it?”
Guardian Wealth Management reiterated the need for expatriates to set budgets, shop around and reduce non-essential spending.