Abu Dhabi inflation speeds up again on housing and utility costs

Housing rents in Abu Dhabi rose by 3 per cent in the final three months of last year and 6 per cent over the last six months, a report from property data company Reidin showed. Silvia Razgova / The NaShow more

Inflation in Abu Dhabi is accelerating again after housing and utility costs rose last month, with expectations for prices to continue to rise this year.

The Consumer Price Index (CPI), which measures the average change of prices paid by consumers for a sample basket of goods and services, increased by 4.1 per cent in December compared with the same month a year earlier, Statistics Centre Abu Dhabi (Scad) said yesterday.

Housing costs jumped 5.8 per cent year-on-year, and the cost of water, electricity, gas and other fuels rose 6.7 per cent.

Annual inflation had seemingly peaked in October as a slide in oil prices and a slowdown in rent rises filtered through to consumers. November inflation dropped to 3.7 per cent compared with an annual rate of 4 per cent in October, Scad data show.

Inflation is likely to keep rising in the emirate, Scad forecasts. The agency said estimates of data for the first quarter show an increase of 0.7 per cent compared with the fourth quarter of 2014. “The estimated annual inflation for the first quarter of 2015 is expected to be around 4.3 per cent,” it said.

From January 1, new water and electricity tariffs apply in Abu Dhabi, including water charges for Emiratis for the first time. For expatriates, water prices will more than double while electricity costs are expected to rise by about 40 per cent.

The Scad data chimes with a recent report from the property statistics firm Reidin, which found that housing rents in Abu Dhabi rose by 3 per cent in the final three months of last year and 6 per cent in the last six months.

More than a year after the Abu Dhabi Government’s decision to remove a cap on rents, property experts are divided over how much rents in the capital have really increased.

Last month Cluttons reported that, overall, rents in Abu Dhabi’s freehold areas increased by just 2.7 per cent during the first nine months of the year. The agency has yet to publish its fourth-quarter data.

MPM Properties, the property arm of Abu Dhabi Islamic Bank, reported last month that rents in most areas of the capital rose by less than 5 per cent during the third quarter.

“It is very hard to get any accurate data on how much rents in Abu Dhabi have really risen,” said Ben Crompton, the managing partner at the Abu Dhabi estate agent Crompton Partners. “Anecdotally we believe that when it comes to rent renewals most landlords are showing restraint and only asking for increases of around 5 per cent.”

Mr Crompton believes that the real driver behind rent increases in the city is an influx of Western expatriates, especially teachers.

“However, what most agents measure is not renewals but rather asking rents for empty properties which are coming to the market. For these landlords seem to have been asking for much higher rent increases, especially for more newly built neighbourhoods on the edge of the city, which are where most newly arrived western expats would prefer to live.”

He estimates that over the past year, asking rents for new leases on one and two bedroom apartments in most newly built areas of the city have increased by about 10 per cent with asking rents in areas such as Saadiyat Island increasing by as much as 15 or 20 per cent.

For the whole of 2014, average consumer prices increased 3.2 per cent year-on-year, Scad said yesterday.

Housing and utilities contributed to more than half of the increase. Furnishings, household equipment and routine household maintenance formed the second biggest contributor to the rise in inflation with an 11.1 per cent increase on 2013. Education costs rose 4.5 per cent.

Inflation across the emirate of Abu Dhabi differed from region to region. Al Ain recorded an overall 3.1 per cent increase in prices while Al Gharbia – the Western Region – only saw a 2.8 per cent uptick.

Data last month from the UAE’s National Bureau of Statistics showed that the rate of UAE inflation in November had fallen for the first time in 6 months, dipping to an annualised 2.8 per cent from 3.1 per cent.

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