The consumer price index has increased this year due to the introduction of 5 per cent VAT
UAE's inflation rate halves to 1.6% in October on lower housing costs
The UAE’s inflation rate nearly halved to 1.6 per cent in October from 3.1 per cent in September thanks to lower housing costs, official data showed on Wednesday.
The housing, water, electricity and gas category, which has the largest weighting of 34.1 per cent in the consumer price index, suffered the steepest fall of 5.18 per cent in October, according to data from the Federal Competitiveness and Statistics Authority.
The only other category to witness price declines in October was medical care, which has a 1.4 per cent weighting and fell 0.16 per cent.
The price of transportation, which has the second-largest weighting of 14.6 per cent in the index, rose 9.3 per cent while the third-largest category of food and beverages with a 14.3 per cent weighting increased 2.12 per cent in October from a year earlier. In September, the housing category fell 4.4 per cent, the category with the steepest dip in that month. Meanwhile, the transportation category rose 12.9 per cent and the food and beverages category gained 3.16 per cent in September from a year earlier.
Inflation rose to a three-year high of 4.8 per cent in January this year with the implementation of 5 per cent VAT. But the overall inflation rate is set to moderate to 3.6 per cent by the end of the year, Mubarak Al Mansoori, governor of the Central Bank of the UAE said earlier this month.
The International Monetary Fund also expects prices to rise 3.5 per cent this year, up from 2 per cent last year.
The property market has softened this year with job cuts, an increase in supply and lower housing allowances.
Sales prices of apartments in Abu Dhabi in the third quarter of this year fell 12 per cent year-on-year, while the prices of villas plunged 14 per cent year-on-year, according to broker JLL.
In Dubai, apartment prices fell 7 per cent year-on-year during the period, while villa prices dipped 8 per cent, according to the broker.
The UAE government is implementing a series of measures to revitalise investor appetite in the property market.
Abu Dhabi announced a three-year Dh50 billion economic stimulus programme called Tomorrow 2021 in June that is aimed at attracting foreign direct investment, creating jobs and boosting non-oil gross domestic product.
The government has also approved plans to grant long-term visas of up to 10 years to a select group of investors, entrepreneurs, executives and specialists, which is expected to help revive the property market.