DUBAI// Dubai and Abu Dhabi have dropped down a list of 130 cities for cost of living.
The World Cost of Living Survey 2012 places Dubai at 94th - a drop of 16 places from last year - with Abu Dhabi in 91st, down five places.
Published by the The Economist Intelligence Unit, the survey looks at the price of more than 400 commodities and goods, city by city.
Jon Copestake, the survey's author, said the key elements making the UAE's biggest cities relatively cheaper to live in are the dirham's peg to the US dollar and strict price controls introduced for staples.
"These items in other places have been subject to inflation, which has made them relatively more expensive compared to the UAE," Mr Copestake said.
"The US dollar has been weak in recent years and the appreciation of other currencies in cities close to the UAE has pushed the relative cost of living down in Dubai and Abu Dhabi."
The survey says the cost of 1kg of bread in Dubai and Abu Dhabi is Dh9, among the cheapest on the list. This price is the same as last year, whereas almost every other city experienced an increase.
But 1kg of white rice is much cheaper in Abu Dhabi than Dubai - Dh8.90 against Dh16.
These compare with Dh28.50 in Tokyo and Dh8 in New Delhi.
Renting a one-bedroom furnished flat for a month will cost you Dh6,655 in Dubai and Dh6,000 in Abu Dhabi, the survey shows.
The Dubai price fell from Dh9,000 last year, but rent increased from Dh5,500 in Abu Dhabi.
Rents in London are Dh11,700, and in New York Dh11,000 for a similar property.
A litre of unleaded petrol in the UAE is among the cheapest in the world at Dh1.70, although the price increased by 3 fils in Abu Dhabi from last year.
The same amount of costs Dh8.30 in Zurich and Dh4.80 in Beijing.
"Dubai has seen a few economic problems that have certainly helped weaken consumer sentiment and demand," said Mr Copestake.
"There is a lag factor that means cheapening real-estate prices have driven other prices down."
He warned that an appreciation of the US dollar and the euro-zone crisis could affect other currencies and lead to a rise in the UAE cost of living.
"A lower cost of living makes a city more competitive and can attract investment, as well as boost export demand," Mr Copestake said.
"Equally, it can depress the buying power of a city and make imports very expensive.
"Expensive cities are that way because they are successful. They attract a lot of visitors and residents who drive up demand. So cities that are cheaper tend to be less attractive places to live."
Experts in the UAE attributed the country's change of rank in the survey to a more competitive property market.
"It seems to me the biggest impact is because of the lower property prices due to oversupply," said Professor David Graf, the dean of the business and economics faculty at UAE University.
"A family might disagree with me because they will be looking at the overall cost of everything, but food is relatively cheap here."
Last month, the Government announced it would end export monopolies on 12 commodities including honey, eggs, fruit, detergents and salt.
The Ministry of Economy hopes the move will lead to cheaper prices for consumers.
An electronic price-monitoring system that checks the cost of about 650 food items such as meat, milk and wheat at 45 retailers went live at the beginning of December.
Fahmi Al Shawa, the managing director of Convenience Arabia, agreed that lower property prices were the key factor.
"For the most part commodities have been pretty stable over the last 12 months," Mr Al Shawa said.
The survey lists Zurich as the most expensive place to live and Karachi as the cheapest.