Dubai Property Prices Bring Inflation to a Record Height

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Inflation in Dubai has reached record levels since 2009. The increase of the inflation’s rate is triggered by the spiking Dubai property prices. Housing costs push consumer prices higher.

According to the Dubai Statistics Center, over the last one year, price levels in Dubai have jumped by 3%. Housing prices have gone up by over 5%, whereas gas prices alone have increased by 15%. This, combined with the predictions for further economic growth of the city, have brought inflation rate to a five-year high.

The IMF believes that Dubai’s domestic output may increase by more than 5%. That will be mainly due to the trade and hospitality sectors in the city. In addition to that, it is estimated that the benchmark index of Dubai is the fastest growing after this year it jumped by 44%.

Also, last year, housing prices in Dubai became the fastest rising in the world after they went up by 35%. This pushed the city’s housing index 1.2% to the north.

But what does this mean for Dubai residents? Above all, the increasing inflation will affect the incomes and the spending of the people who live in the city. Even though salaries increased by 5% in 2013, Dubai residents have less money to spend today. That is because housing prices and the inflation rose at a faster rate than salaries. The situation is even more challenging for expats, who make up the bigger part of Dubai’s population. They are not entitled to get utilities subsides and are required to pay a housing fee of 5% every year.

According to Emirates NBD, explained that people who want to continue to maintain their living standards and spend the same amount of money as they did a while ago, have two options. The first is to borrow money, while the second is to use their savings.

Despite that rate with which property prices in Dubai are rising has slowed down in 2014. That is mainly thanks to stricter mortgage lending policies, as well as the increase transaction fees. As a result, residential costs jumped only by 3% during the first three months of this year. In contrast, during the last month of 2013, they increase by 6%.

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