Is Doha becoming too expensive to save?
With a lack of reliable data to help expats assess the real value of the salaries they are offered, does the lure of a sizeable tax-free salary sometimes fail to match expectations?
Antoine Alsmadi, who has been living in Qatar for 10 years, shakes his head when I ask him how much of his salary he spends each month on daily expenses for his four-member family.
“It feels like I was spending only half the amount about a year ago,” complains Alsmadi, who works as a sales representative for a construction materials company. “I live from one salary to the next. Now I’m thinking of sending my wife and kids home.”
Alsmadi is not alone in thinking the cost of living is on the rise. The Consumer Price Index figures released by the Qatar Statistics Authority show the cost of almost everything in Qatar, including food, housing and entertainment, rose by an average of 2.8% from November 2012 to November 2013.
Katya Stojkova, an HR manager, says the biggest price increase she’s seen is rent. The same one bedroom flat she rented at QAR 6500 a year ago has now gone up to QAR 8000 and fortunately she’s been able to renew her lease at the old price.
“In daily activities, like eating out or filling up my car, I haven’t noticed a big change. But in weekend activities, like a brunch with friends or going shopping, I’ve felt that prices have risen,” says Stojkova, who has been in Qatar for almost three years.
Like many other expats, Stojkova moved to Qatar based on a certain salary offer only to find the actual cost of living way higher than expected. With a lack of reliable data to help expats assess the real value of the salaries they are offered, the lure of a sizeable tax-free salary can sometimes fail to match expectations.
According to the International Monetary Fund, Qatar’s average inflation is expected to grow to around 4 to 5% in the medium term. The demand for housing continues to exceed supply, pushing up prices.
Employment packages for expats are usually quite lucrative with substantial allowances.
But there are several different “economies” running in Qatar and a gaping divide between wealthier, mostly Western expats and lower level unskilled workers, with middle management workers somewhere in the middle.
The adverse impact of mounting inflationary pressures is sure to be felt most deeply by unskilled or semi-skilled workers who have little leverage to negotiate better salaries. But even better-off expats have felt the pinch of rising costs.
Everything is more expensive
Consumers balked early last year when Karwa raised its minimum fare for a taxi ride from QR4 to QR10, and its airport minimum from QR18 to QR25. Twenty-eight private schools have just been given approval by the Supreme Council of Education to increase their fees for the 2013-14 academic year. It’s not surprising that some expats make the difficult decision to work on “single” status contracts.
There is no sign that Qatar will set a minimum wage for expats and so companies are not obliged to take cost of living surveys into account when calculating remuneration packages or salary increases. Economists point out that, in order for stagnant private sector wages to grow, productivity needs to grow alongside it.
Tough choices to make
So how do expats balance the trade-off between enjoying a good lifestyle and saving?
Just like any other location, goods and services in Qatar range from very cheap to very expensive but, overall, most items do tend to fall into the more expensive category, and it’s not so easy to cut back or follow a downgraded lifestyle without compromising in some important ways.
“My flat is expensive,” admits Stojkova. “Yes, I could find cheaper accommodation. But I’m not prepared to compromise on living standards. I find the cheaper options in Doha to be unsuitable in so many ways, and of very poor quality.”
Qatar’s cheaper rental options are not well regulated and dominated by landlords (or agents) who sublet partitioned spaces indiscriminately. In fact, the living conditions of many who live in these places, found all over Qatar, are the subject of growing debate and social tension for the city. Cheaper housing accommodation is springing up further out of Doha but you’ll need a car since Qatar’s public transport system is under development.
The loan trap
Many expats are complaining that in order to meet the goals they set before coming to Doha, which for many is buying a home and paying off debts back home, they are forced to take out financing in the form of personal loans. Start up costs such as furnishing a new house, utility deposits, buying a car, along with school fees, uniforms and books are some of the big expenses for new expats. The low interest rate on loans offered by Qatari banks may be a big help but does this mean that expats are drawn into a debt trap against their will?
Qatar’s stability and tax-free status means that right now it’s attractive to international assignees and multinational companies. Is Qatar at risk of losing competitiveness to equally stable cities offering a better quality of life relative to the cost?