Dubai’s inflation rate decreased to 3.32% in July, marking its lowest point for the year, despite continued increases in housing costs. According to the latest data from the Dubai Statistics Centre, inflation in the emirate has been driven primarily by rising housing, utilities, and fuel costs, which constitute over 40% of the consumer price index (CPI).
Housing and Transportation Costs
The costs associated with housing, utilities, and fuels surged by 6.76% annually in July, the highest increase recorded this year. Additionally, transportation costs saw a slight annual increase of 0.18% in July, in contrast to a 3.32% rise in June. Emirates NBD noted in a research report that with the recent drop in oil prices in August, transportation may contribute to reducing inflation in future assessments. On a month-to-month basis, the CPI index experienced a slight decrease of 0.1%.
Decline in Service Sector Prices
In July, the prices for restaurants and accommodation services fell by 0.31% annually, following a 0.79% rise in June. The costs associated with recreation, sports, and cultural activities, as well as information and communication services, also declined. However, the consumer price index was influenced by a 0.35% increase in the prices of furnishings, household equipment, and routine household maintenance in July, compared to a 0.68% rise in June.
Food and beverage prices saw a modest annual increase of 2.46% in July, up from 2.35% in June, while tobacco prices declined. Education costs rose by 3.7% on an annual basis and remained stable compared to the previous month.
Dubai Real Estate Market: A Growth Driver
Dubai’s property market has seen significant growth in recent years, bolstered by government initiatives such as residency permits for retirees and remote workers, along with the expansion of the 10-year golden visa program. The UAE’s broader economic diversification efforts have also played a crucial role in supporting the real estate sector.
During the second quarter, both rental rates and property prices in Dubai saw an upward trend. Apartment and villa rental rates increased by 3% and 2%, respectively, while average property prices rose by 2%.
Impact of Global Wealth on Dubai Real Estate
The global increase in wealth creation has had a profound impact on Dubai real estate market. As high-net-worth individuals seek to diversify and protect their assets amidst geopolitical uncertainties, Dubai has become a favored destination for investment, according to recent real estate reports.
Economic Growth and Diversification Efforts
Dubai’s economy continues to expand, fueled by ongoing diversification initiatives. The emirate’s economy grew by 3.2% annually in the first quarter of 2024, contributing Dh115 billion ($31.3 billion) to its gross domestic product (GDP). This growth was largely driven by the transport and storage sector, as well as the financial and insurance industries. This momentum follows the previous year, where the economy grew by 3.3% to reach Dh429 billion.
Inflation in the UAE decreased to 1.6% last year from 4.8% in 2022, largely due to lower energy prices, which resulted in a 5.6% decline in transportation costs, according to the UAE Central Bank’s report in June.