Lower housing costs cut UAE inflation by almost half in October
The UAE’s inflation rate nearly halved to 1.6 per cent in October from 3.1 per cent in September thanks to lower housing costs, data showed yesterday.
The housing, water, electricity and gas category, which has the largest weighting of 34.1 per cent in the consumer price index, suffered the steepest fall of 5.18 per cent last month, according to the Federal Competitiveness and Statistics Authority.
The only other category to experience price declines in October was medical care, which has a 1.4 per cent weighting and fell 0.16 per cent.
The price of transportation, which has the second-largest weighting of 14.6 per cent in the index, rose 9.3 per cent, while the third-largest category of food and beverages with a 14.3 per cent weighting increased 2.12 per cent in October from a year earlier. In September, the housing category fell 4.4 per cent, the category with the steepest dip in that month.
Meanwhile, the transportation category rose 12.9 per cent and the food and beverages category gained 3.16 per cent in September from a year earlier.
Inflation rose to a three-year high of 4.8 per cent in January this year with the introduction of 5 per cent VAT. But the overall inflation rate is set to moderate to 3.6 per cent by the end of the year, Mubarak Al Mansoori, Governor of the Central Bank of the UAE, said this month.
The International Monetary Fund also expects prices to rise 3.5 per cent this year, up from 2 per cent last year.
The property market has softened this year with job cuts, an increase in supply and lower housing allowances.
Sale prices of apartments in Abu Dhabi in the third quarter of this year fell 12 per cent yearon-year, while the prices of villas plunged 14 per cent year-onyear, according to broker JLL.
In Dubai, apartment prices fell 7 per cent year-on-year during the period, while villa prices dipped 8 per cent.
The UAE Government is introducing measures to revitalise investor appetite in the property market.
Abu Dhabi announced a threeyear Dh50 billion economic stimulus programme called Ghadan 21 in June intended to attract foreign direct investment, create jobs and boost non-oil gross domestic product.
The Government has also approved plans to grant longterm visas of up to 10 years to a select group of investors, entrepreneurs, executives and specialists, which is expected to help the property market.