Dubai consumer price inflation rose at an annualised rate of 4.4 per cent in August. That represents an increase of 0.2 percentage points in comparison to July, when prices rose at an annualised rate of 4.2 per cent.
But analysts said that Dubai prices had probably peaked, as the cooling in the emirate’s property market has not yet reached official figures.
Last month’s inflation rate was below the five-year high reached in May, when inflation peaked at 4.7 per cent. Housing costs were up 6.6 per cent over the preceding 12-month period, the data showed. But informal data show the emirate’s property market has been slowing following the doubling of a transaction tax on sales, and the introduction of caps on the level of mortgage debt consumers can take on – which suggests that official figures are yet to catch up with the latest developments in Dubai’s property market.
Tim Fox, chief economist at Emirates NBD last week said that Dubai now has a “two-speed property market”, as home sales values fall much faster than rents. Luxury property prices across Dubai have fallen by up to 10 per cent, according to the real estate consultancy Asteco. In the premium area Dubai Marina, property prices have fallen by up to 17 per cent, while prices on Palm Jumeirah have fallen by 13 per cent.
But the prices of some cheaper homes rose. In Discovery Gardens, average sales prices rose by 4 per cent, while in the International Media Production Zone, prices rose by 3 per cent.
That has been driven by accommodation shortages for Dubai residents on low and middle-incomes.
“There tends to be a lag between prices falling and rents coming down,” said Jason Tuvey, an emerging markets economist at Capital Economics. “Rental inflation should start to come down in the coming months.” Food prices fell 0.1 per cent year-on-year, and dropped 2.4 per cent again at the end of Ramadan.
Global food prices are at a five-year low, according to the United Nations Food and Agriculture Organization, and the strong dollar has pushed up the dirham, cutting the UAE’s import bill and reducing imported inflation.
”The stronger dollar has also helped to keep food inflation in check – it’s mainly been a housing and more recently a fuel price story in the UAE,” Mr Tuvey said.
The inflation rate in Dubai now lags price rises in Abu Dhabi, where inflation topped 6 per cent last month, after the capital’s rental market was declared the second-most expensive in the world by the real estate research firm CBRE, and the impact of a reduction in fuel price subsidies filtered through to petrol prices.
The UAE is likely to raise interest rates in coming months, as the Federal Reserve, the US central bank, ends the era of zero per cent interest rates that have buoyed asset prices in America and in the Gulf.
abouyamourn@thenational.ae
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