Following the global financial crisis of 2008-09, the cost of the living has been consistently on the rise in the UAE over the last few years – courtesy rise in rentals, grocery rates, school fees, abundant liquidity in the country due to high oil prices and a host of other factors pushing the inflation higher.
But with the softening in rents and decline in certain commodity prices, the cost of living has been going down of late in the country as inflation declines in line with slowing economy due to low crude prices.
According to the World Bank’s latest forecasts, UAE will see a decline in cost of living this year with inflation projected to more than halve from 2.1 per cent in 2014 to approximately 1 per cent this year. Inflation in 2013 was 2.5 per cent.
The Dubai Statistics Centre released its monthly consumer price data last week, showing March inflation falling to 4 per cent due to a fall in food prices.
Housing rents, which make up a large chunk of Dubai Statistics Centre’s basket of inflation, are forecast to soften this year due to increased supply of new residential units across the emirate.
Even though housing and utility costs in Dubai jumped 7.4 per cent year-on-year in March, the figure marked a slowdown from a 7.6 per cent gain in February. Food and beverage prices, on the other hand, fell 1.9 per cent from a year earlier, after a 0.6 per cent drop in the previous month.
Mat Green, Head of Research & Consultancy UAE, CBRE Middle East, said in the first quarter ‘Dubai Property Report’ that rents in the emirate will come under pressure as new housing supply comes into the market – further bringing down the inflation rate in the emirate.
Real estate consultancy Asteco sees significant drop in rental rates. It said earlier that rents will not only soften in 2015, but a more significant drop in rental rates could be on the cards from 2016 onwards as a large number of projects announced in 2013-14 – an estimated 12,000 to 14,000 villa units – are completed.
The decline in the cost of living can also be attributed to the strengthening UAE dirham, lowering costs of imports along with a drop in prices of clothing, medical care and restaurants.
Official figures released by the National Bureau of Statistics have showed that inflation slightly dropped to 3.6 per cent across the UAE in February 2015.
World Bank said in its Mena Economic Indicator report that the UAE’s real GDP growth is forecast to slow from 4.7 per cent in 2014 to 3.1 per cent this year due to a decline in oil prices.
“The non-oil economy is projected to expand by over 4 per cent per annum in the coming years on the back of Dubai’s strong core services sectors and Abu Dhabi’s diversification efforts,” it said.