Adam Bouyamourn
Dubai inflation last month remained at 4.2 per cent, as housing cost increases continued to push up prices across the emirate, according to data from the Dubai Statistics Center. Housing costs, which account for 44 per cent of consumer expenses, were up 7.7 per cent against the previous year.
Food prices fell by 1.8 per cent year-on-year. The prices of 500 staple food products would be frozen this year, the government announced at the end of November. Expenditure on food accounts for about 11 per cent of Dubai’s consumer price inflation basket.
"Domestic inflation of Dubai is mainly driven by rising rents," said Alp Eke, a senior economist at the National Bank of Abu Dhabi. "With lower oil prices, foreign-origin inflation is expected to decline. Similarly, with lower global food costs, the contribution of food to foreign inflation will be lower.
“Population growth in combination with GDP growth is creating demand for housing. This trend is likely to continue over the coming months.”
Mr Eke estimates that about three-quarters of price increases in Dubai are driven by domestic developments, with international price changes accounting for just a quarter of inflation growth.
Dubai’s inflation rate remains slightly below October’s 4.4 per cent year-on-year increase – the biggest annualised rise since the 2009 global crash.
Recent reports from property consultancies JLL and Cluttons show residential rent price inflation in Dubai flattening out.
In the third quarter of last year, the most recent period for which figures are available, Dubai freehold rents fell by 0.4 per cent, according to a recent JLL report.
Dubai residential rents showed “a welcome levelling-off in the summer”, the report said.
However, there has been no slackening of rental costs for retail firms. Rents in super regional malls jumped by more than 50 per cent year-on-year over the same period, according to JLL.
The slowing of rent increases will take several months to filter through to official statistics, experts said.
Full-year inflation figures are not yet available from the UAE statistics agency.
Countrywide inflation hit 2.8 per cent in November. UAE inflation for all of last year is expected to come in at 2.5 per cent, according to a Reuters poll of economists. Meanwhile, 2015 inflation is expected to increase to 3 per cent, the poll showed.
Lower oil and increased tourism would boost growth and push up prices in 2015, Mr Eke said.
“[This year], world trade and tourism figures are expected to increase with lower oil prices,” he said. “Dubai will benefit from increased trade volumes with oil-importing countries in Asia. Tourist figures are also expected to register record highs during 2015.”
abouyamourn@thenational.ae
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