Dubai Inflation Remains Low In April Despite Jump In Rents

Dubai’s inflation remained muted in April compared to the previous month despite a jump in rents, data showed on Wednesday.

Consumer price growth in Dubai, one of seven United Arab Emirates, started picking up in 2013 after a year of deflation as the property sector recovers from a 2008 price collapse.

On the month, however, inflation remained at an anaemic 0.1 per cent in April for the second month in a row, data from the Dubai Statistics Center showed.

On an annual basis, inflation edged up to a two-year high of 0.9 per cent, up from 0.6 per cent year-on-year in March.

“The April number continues to show very little evidence of inflation pressures in spite of strong demand conditions and significant housing and rental price increases in certain areas,” said Liz Martins, HSBC’s senior Middle East economist .

“In theory, the strong growth conditions and price rises we have seen in housing should push overall CPI readings higher in 2013, but the feed-through to the CPI has in fact been remarkably limited so far,” she said.

Developers in Dubai are dusting off stalled building plans, encouraged by an economic recovery after a 50 per cent drop in house prices from the 2008 peak triggered a series of debt restructurings in state conglomerates.

Housing and utility costs, which account for almost 44 per cent of consumer expenses in the Gulf trade and business hub, rose 0.8 per cent from a year ago in April, the sharpest increase since January 2010, and 0.5 per cent month-on-month.

“Looking forward, a small rise in inflation may be expected because of the normalization in the rent category, but there is no global price pressure,” said Giyas Gokkent, chief economist at National Bank of Abu Dhabi.