A research by National Bank of Abu Dhabi (NBAD) revealed on Tuesday the inflation rate for the emirate of Dubai climbed to 4.22 percent, the highest level since May 2009.
The main drivers of the rising inflation rates are the cost of housing and utilities followed by cost of food. Communication and transport were the only segments which posted zero inflation or price declines, respectively.
However, residential unit sales prices have experienced a mild correction during summer months but rents maintained the high levels. However, by now rents are also on the decline path.
Earlier in the week, Dubai-based real estate service provider Asteco said apartment and villa rents dropped in the third quarter by 2 percent and 3 percent in the third quarter of 2014. In October, the declines are much more significant, even prompting industry insiders to discuss a possible more significant correction.
Stock prices have likewise corrected in recent months, signaling an exhaustion of the rally which saw the general index gaining 50 percent in the first six months. Central banks around the world warn against overvalued assets in recent months.
The Dubai economy has been booming during the past 2 years with annual growth rates in gross domestic product in excess of 4.5 percent, driven by trade, tourism, manufacturing, construction and real estate. However, the high cost of living and setting up business rather prevents the gradual progressive economic development than to encourage it.
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