UAE Housing Cost Goes Up

Abu Dhabi--House rents and related services in the UAE surged by 17.5 percent in 2007 as the Gulf country recorded one of its worst inflation rates, according to official figures. Rents jumped by 18.8 per cent while most other associated items and services, including furniture and housemaids, became much costlier except the heavily subsidised water and power supply, which either stabilised or declined.

Figures by the Ministry of Economy showed that 2007 was one of the best years for the UAE in terms of economic growth and revenues. But it was one of its worst years in terms of inflation, which soared by nearly 11 per cent. The UAE has cited a surge in food prices and rents as the main reasons of inflation along with a higher import bill because of the decline in the US dollar.

While higher food prices was caused by a surge in global farm costs, strong demand triggered by the economic boom allied with soaring fuel and construction costs to push up rents and other housing services.

According to the Ministry of Economy, house rent and related items surged by 17.5 per cent in 2007, far higher than the 12.5 per cent growth in 2006. Rents alone leaped by 18.8 per cent while the prices of furniture and associated services swelled by nearly 13 percent in 2007.

Water and electricity prices were almost the only exception as water rates remained flat because of heavy government subsidies on water supply for domestic use. Electricity rates declined by around 5.5 percent. But butane gas and kerosene prices rocketed by nearly 16 percent while charcoal shot up by 21.2 percent , the figures showed.

Furniture costs surged by 16.2 percent and carpets and covers by around 10.7 percent. Sheets, towels and curtains prices also swelled by 13.4 per cent. The figures showed that while refrigerators were cheaper in 2007, washing machines became costlier, leaping by around 14.9 percent. Gas cookers prices rose by nearly 3.6 per cent and other household by 4.4 percent.

In a previous report, the ministry estimated inflation in the UAE at 11.1 percent in 2007 and said soaring rents and food prices were the main reasons. Abu Dhabi, the principal oil-producing emirate, had the highest inflation rate of nearly 11.6 percent, followed by Dubai and Sharjah.

The rate last year meant the UAE had the second highest inflation level in the GCC after Qatar, which recorded over 13 per cent. The UAE rate was also nearly triple Saudi Arabia's inflation of around 4.1 per cent and four times the inflation rate in Bahrain.

Last year's figure was far higher than the inflation rate of 9.4 percent recorded in the UAE in 2006 and nearly double the rate in 2005.

Economists expect inflation to remain high this year as rents are rising, food prices are expected to increase further, and the UAE remains reliant on imports, which have grown in value and quantity because of a regional business upsurge and the peg between the UAE dirham and the dollar.