Residential rents in Dubai fell by 5 per cent in this year's first quarter compared with the same period last year as the weak property market helped to keep a lid on overall costs.
Inflation edged up only slightly despite a nearly 23 per cent rise in fuel prices in the quarter compared with last year's first quarter, data from Dubai Statistics Centre showed yesterday.
Fruit, vegetables and other products also cost more.
"Excess supply means housing will be a factor in keeping inflation at moderate levels," said Mohamed Lahouel, the chief economist at the Dubai Department of Economic Development.
A fast-growing property market contributed to spiralling inflation in Dubai before the financial crisis sent prices downwards. Now, increased housing choice is helping to contain living costs.
Housing and utility costs are the largest component of the emirate's consumer price index, making up 44 per cent of the calculation.
Overall inflation rose only 0.97 per cent in the first quarter over the same period last year. Inflation reached 0.5 per cent last year.
Dubai officials have been keen to portray the virtues of the low-inflation environment as a potential magnet for foreign business.
Yet the marginal rise in the headline rate masks much larger jumps in the index's basket of consumer goods and services.
Local and global increases in fuel costs helped to push up transport costs by 9.7 per cent during the quarter. The latest of two rises in fuel prices - which combined totalled as much as 27 per cent - came into force in July last year after the Government decided to relax fuel subsidies. As a result, fuel prices for personal transport in Dubai rose by 22.9 per cent. But consumers in the emirate were also hit by an increase in the cost of air travel linked to higher fuel prices. Ticket prices in Dubai increased by 10.8 per cent.
Food and non-alcoholic beverages, the second-biggest part of the consumer basket, increased 5.6 per cent during the quarter. Fruit prices increased by 13 per cent, vegetables by 8.9 per cent and food products by 10.6 per cent. A combination of bad harvests in key agricultural areas of the world and a global economic rebound fed supply pressures.
"With the food prices, it's important to remember they could have been even higher, but the Government agreed with retailers to last month control prices across the UAE," said Shady Shaher, a Middle East and North Africa economist at Standard Chartered.
Elsewhere, the index suggests improvement in the emirate's economy. The cost of hotel accommodation rose by 5.8 per cent, and restaurant and cafe prices increased 3.1 per cent.
"The rise within restaurants and hotels is due to rising occupancy levels as demand picks up, enabling hotels to increase prices," said Mr Lahouel.
Higher tuition fees lifted the cost of education by 3.41 per cent.