More than half of UAE expatriates say they moved to the country to increase their income and a fifth of them say their salaries doubled when they relocated to the Emirates, a study from HSBC found.

Twenty per cent of those polled by HSBC for its Expat Explorer 2018 study said their yearly wage doubled in comparison to their earnings before their move to the UAE, with the average annual expatriate salary of $155,039 (Dh569,500), the sixth highest globally. The study surveyed 22,318 expatriates from across the globe, including around 900 in the UAE.

According to HSBC, the UAE is now the fourth best country for economic prospects for expatriates – up one place from last year – with 67 per cent of those polled having “more disposable income thanks to higher earnings and the tax-free environment”.

“We are seeing an interesting dichotomy among UAE expatriates,” said Marwan Hadi, head of retail banking and wealth Management, HSBC UAE. “Eighty-five per cent say they are able to build up their savings and pay off debt, yet 93 per cent are not fully aware of or have explored their financial options. It is clear many are missing the opportunity to make their wealth work for them.”

___________

Read more:

New to the UAE guide: set-up costs, visas, rent, school fees and more

New to the UAE guide part 2: banking, saving, investing and sound financial advice

Is the UAE's new five-year visa a game changer for expat retirement?

___________

The National reported last week that salaries among Dubai’s workforce have dropped on average as recruiters drive a harder bargain and the job market undergoes a natural correction.

Dubai’s income level, as measured by GDP per capita, stood at $45,000 in 2013, before falling to $37,000 in 2018. It is expected to fall again to $36,000 in 2020, according to a new analysis by ratings agency Standard and Poor’s. Experts said the development marks a maturing of the market, however, HSBC’s study indicates that salary offers in the UAE are still favourable to overseas applicants.

While Switzerland topped HSBC’s list of global destinations with the biggest pay packets, with an average expatriate salary of $202,865, the US took second place at $185,119 and Hong Kong came third at $178,706. The UAE took sixth position on the ranking.

Graphic by The National

David Mackenzie, the managing director of the GCC recruitment consultancy Mackenzie Jones Group, said it is “true” that people relocating to the UAE are looking for a big raise. However, he says the Emirates cannot be entirely considered tax free. “If you are a recruiter in the UK on an annual salary of £34,000 (Dh164,290), for example, then you will look at moving to the UAE on Dh20,000 per month. At £49,702 a year, this represents an increase of £15,702 but in real terms (once you factor in the 33 per cent tax they were paying in the UK) the increase actually sees them £26,922 a year better off – that’s a pay increase of over 118 per cent,” he said.

Mr Mackenzie said the issue is that the UAE cannot be considered tax free due to the presence of VAT.

"And with the big increase in living costs, that is, utilities, Salik and rent, then the percentage increase is a lot lower," he said.

__________

Read more:

The five-step guide to low-cost offshore investing for UAE residents

Personal finance in the UAE: Residents track finances better but struggle with saving and debt

Retiree visas: wills and property firms expect surge in demand from older residents

__________

HSBC said non-Emiratis can capitalise on their higher earning potential more effectively with the “right financial planning”. The study found the top investment priority for UAE expatriates is buying property for 48 per cent of those polled, followed by retirement for 53 per cent.

A shift in how residents save and invest is also likely in the future after the UAE government unveiled a new retirement visa last month that allows those aged over 55 to stay in the country for an extra five years with the possibility of renewal once the term is up.

“Traditionally, expatriates have channelled most of their investments outside the UAE often to their home country. However, the recent announcement by the UAE Government to afford special residency visa privileges for expatriate retirees has certainly paved the way for more to consider their long-term plans in the UAE,” said Mr Hadi. “Already two-thirds live here for more than five years, and as expatriate-friendly reforms come forth, we might see more expatriates settling their roots down here.”

To qualify for the five-year retiree visa, set to be available from 2019, residents over 55 must either have an investment property worth at least Dh2 million, financial savings of Dh1m, or an active monthly income of Dh20,000 or more.

While property experts expect a surge in new business from older residents looking to qualify for the visa, according to the HSBC survey, only 17 per cent of those polled own a property in the UAE. Plus, a typical expat only keeps a fifth of their wealth in the Emirates.

Steve Cronin, the founder of DeadSimpleSaving.com, a website to help residents invest their money themselves, said those with sensible spending patterns can find their spare money builds up fast in the UAE.

"They often don’t know what to do with it because offshore investing is a bit more complex and they aren’t used to having so much money," he said. "There are plenty of horror stories about off-plan property investing, pension transfers and fixed-term savings plans. So people sit on their cash because few companies have the incentive to show them a cheap and smart way to invest."