Signs of rising property prices in Dubai feeding through to consumer inflation emerged at a faster pace last month.
The housing and utility component of the consumer price index (CPI), which accounts for 44 per cent of overall inflation, grew 2.9 per cent compared to the same month last year, according to data released yesterday by Dubai Statistics Centre.
Prices edged 0.1 per cent higher from August.
Until last month, the average price increase in the component in the year to August was just 0.3 per cent.
September’s pickup helped to fuel a rise in headline inflation. On an annual basis, prices rose 1.9 per cent. On a monthly basis, they rose by 0.1 per cent. Economists have said the marginal rise in housing costs this year has been out of sync with the rapid ratcheting up of rent prices.
Rental rates for mid-range villas and apartments have accelerated by 20 to 30 per cent in the first nine months of the year compared to the year earlier period.
“The housing component of the CPI [consumer price index] does not capture the marginal increases in housing costs from month to month, due to differences in methodology compared with the indices measuring market prices,” said Khatija Haque, a senior economist of Emirates NBD, in a research note published yesterday before the release of the latest CPI data.
“This was the case when prices declined sharply in 2009-10 as well, with housing CPI lagging indicators in both the speed and depth of the price adjustment.”
Emirates NBD this month dropped its inflation forecast for this year from 2.5 to 1.5 per cent. It expects the reading to climb to 3 per cent next year.
Elsewhere in the index, food and beverage prices, which make up 11 per cent of the basket, edged 1.8 per cent higher last month from September 2012. They sank 0.6 per cent from August.
Inflationary pressures have remained relatively weak since the global financial crisis tightened the availability of credit and weakened the property market.
But property prices have rebounded sharply this year as confidence returns to the market and stalled projects restart.
The property broker Asteco reported that average apartment prices in Dubai rose 42 per cent over the 12 months to the end of last month and villa prices climbed 26 per cent.
Credit availability is also slowly creeping higher, with private sector loan growth reaching 4.2 per cent in June, the latest data available.