Rising costs of housing and education fees can erode benefits of zero income tax that traditionally lures expatriates to the United Arab Emirates, said a new study.

New rules have put property purchase out of reach for many professional expats, and the rental market is heating up, while education fees are a source of financial stress, added the new study by Economist Intelligence Unit, sponsored by Friends Provident International.

UAE continues to be one of the world’s most expensive international schooling destinations, it elaborated.

Millions of expatriates work in the United Arab Emirates, attracted by a dynamic jobs market and the promise of tax-free income. But those expecting to pocket the tax break could be in for a surprise, according to the report.

UAE Expats and the Bottom Line finds that a range of costs of living challenges eat into the extra income of professional expats—with property and education standing out.

In property, new rules introduced to cool the market have increased the size of down payments needed to buy larger properties, pushing more expats into the rental sector.

In some districts of Dubai, rents have risen by over 10 per cent a quarter, while prices for some high end accommodation have returned to the 2008 peak. In Abu Dhabi, rents rose by 10 per cent in the first quarter of 2014.

While top end accommodation prices in the UAE favourably with the likes of London and New York, they sit atop a very different—and more polarised—market. In the UAE, there is a dearth of mid-range properties, effectively forcing many expats to take pricier accommodation than they otherwise would.

Education is a second big challenge, with fees set to rise again this year by between 1.7 per cent and 3.5 per cent—and some schools seeking increases of up to 7 per cent. As competition for jobs in the UAE intensifies, some employment packages are losing perks such as education benefits. The cost of education has made some expatriates reconsider the length of their stay in the UAE, especially as fees ratchet up at secondary-school level.

Combined with the array of charges, fees and indirect taxes, the real cost of living in the UAE can challenge the unprepared expat.

Adam Green, editor of the report, said: “While the UAE does still offer high salary packages and zero income tax, expats should not assume they are going to simply pocket the difference of the tax break, with everything else staying equal.”

“The cost of property and school fees is among the biggest challenges, but utilities, charges and indirect taxes can all add up. Expats who plan to save money while here need to do their sums before making the leap,” he added. – TradeArabia News Service