Dubai’s Cost of Living at All-time High

Last month, Dubai’s inflation rate jumped to its highest since 2009 driven by inflated property and food prices. According to the latest data, the cost of living in March increased 3 percent on the year before. This is an official data and it is very much likely the actual numbers to be much higher.

According to figures from the Dubai Statistics Center, housing and utility costs registered 4.8 percent year-to-year rise. Both represent roughly half of all consumer expenses in Dubai. Compared to February, this an average increase of 0.4 percent.

Prices of food and drinks have also seen a further rise in March – while in February, they were 1.2 cheaper, and their cost to the consumer went up by 4.8 percent from the same period of the previous year. For example, the price for a peanut butter jelly jar now is 17,85 Dirhams, while a year ago was about 8 Dirhams.

The growth in the property market significantly influenced the cost of living in Dubai. Prices of residential real estate continue to rise, although a steady supply in the sector is maintained with the endless release of new projects. Property prices may have reached the current cycle peak, as lately the number of residential property transactions declined, while distressed sales pop up across the classifieds more often then during the past two years.

The economy is on the path of recovering from the recession of five years ago. This has lead to a rapid inflation in the property values and residential rents. The unprecedented rise was further driven by the removal of the rent cap.

In 2013, headline inflation rate was officially estimated at 1.1 percent. After an annual inflation rate of 1.75 per cent year-on-year in February, the prices in the UAE are expected to increase to 2.4 per cent on average this year.

According to Dubai Statistics Center, the current rate of inflation is at its highest since August 2009, when the global financial crisis reached Dubai and caused debt in a number of companies, including state-owned Dubai World and its subsidiary Nakheel. Analysts forecast an average inflation in the UAE of 2.5 percent in 2014, and in 2015, it is expected to reach 2.7 percent.