x Abu Dhabi, UAESunday 21 January 2018

Counting the cost of price surveys

The cost of living is higher in the UAE than in most other GCC nations, but that does not tell the whole story.

A cursory glance at the results of a recent survey comparing the cost of living in the UAE to other nations in the region might raise concerns. It revealed that those living in the UAE pay more than in any other GCC nation for household utilities, petrol and for British or Indian curriculum education. For the price of accommodation, the UAE is only exceeded by Qatar.

However the nuanced picture is not quite as simple – and certainly not as alarming – as the one that initially emerges from the GCC Cost of Living Report. Comparing prices is only part of the equation, and many believe that a more accurate guide to affordability is based on the ability to pay and by that standard, the UAE is doing well in terms of income versus expenditure.

Some of the biggest disparities in prices between the GCC states involve commodities for which there is not always a clear public benefit in a lower figure. The price of petrol is one example. The Dh1.65 a litre paid at the pump in the UAE is about four times as much as paid by drivers in Saudi Arabia. However the 44 fils per litre price there is an artificial one that reflects greater government subsidies to keep prices down. The price of filling a tank in the UAE comes closer to the real cost, acts as a means to encourage moderate consumption and avoids the subsidised prices to which citizens of nations in the wider region, such as Egypt and Yemen, have become financially and politically dependent.

That is not to say that there is no cause for concern. For both education and accommodation, supply and demand have not always been in sync, prompting large and volatile movements in prices.

At times when it was markedly out of kilter, such as in Abu Dhabi in 2006, the government has stepped in to cap rent rises. The completion of tens of thousands of new apartments and villas has since created a situation where market forces will find an equilibrium without the need for official intervention.

Education is one sector where there is cause for concern about an increasing shortage of capacity. The authorities are right to monitor this because the top flight of expatriate professionals who will join the Emiratis in building a modern and resilient UAE will not move here if they believe their children’s education will be compromised. For all the focus on price, that is the real cost that ought to be taken seriously.