Dubai is the costliest city in the Middle East for international employees, according to a new report, with rising rents and insurance premiums contributing to the growth in expenses.

The findings of the ‘2024 Cost of Living City Ranking’ by the US-based consulting firm Mercer are that Dubai currently ranks 15th globally as the most expensive city, up three places from 2023, in a study spanning 226 cities.

According to the report, the overall cost of living in Dubai has been impacted by upward movement in the rental property market, with the emirate recording a 21% jump in housing prices between 2023 and 2024. In the apartments segment, the survey showed average increases of around 15% for three-bedroom properties year-on-year, while house rental prices have risen by an average of 32% in the same period.

This was significantly higher than year-on-year movements in other fast-growing cities such as Singapore (average year-on-year rent increase of around 10%), Amsterdam (7%), New York (6%), and Hong Kong (7%).

Dubai also witnessed moderate increases in prices for groceries (up 5%) and personal care items (up 3%), while transport costs remained stable, although Mercer analysis suggested insurance premiums are expected to rise following the storms and flooding in April 2024.

“Dubai remains an extremely competitive city when it comes to attracting international businesses, because of the quality of life and the dynamic growth of the non-oil economy. However, prices – particularly rental costs – are rising above the global average for fast-growing cities, which is pushing companies to reconsider their approach to employee compensation,” Vladimir Vrzhovski, Principal at Mercer Middle East, said in a statement.

“Rising housing costs in cities around the world have made talent mobility a challenge for employers, and companies in Dubai are likely to face the same pressures when it comes to attracting and retaining top talent,” he added.

After Dubai, Tel Aviv emerged as the next most expensive city in the Middle East, which dropped eight places from the previous year to rank 16th. The UAE capital Abu Dhabi made its debut on the list, ranking 43, followed by Riyadh (90) and Jeddah (97).

According to Mercer, Saudi Arabia moved up the rankings breaking into the top 100 cities, which reflects the “increased demand for international talent aligned with the kingdom’s economic transition and growth strategy.”

Hong Kong, Singapore, and Zurich were ranked as the costliest cities for international workers, holding their positions in Mercer’s rankings from last year. At the other end of the spectrum, the cities that ranked the lowest for living costs were Islamabad, Lagos, and Abuja.

(Reporting by Bindu Rai, editing by Seban Scaria)