Kuwait vows war on property costs

RENT SURGE: Annual inflation in the oil exporter hit a record of 6.2% in September, driven by rocketing rent costs.

Kuwait wants to fight rising real estate prices and ensure a decent living standard for citizens after inflation hit record levels, state news agency Kuna said yesterday.

Annual inflation in the Middle East’s fourth-largest oil exporter hit a record of 6.2% in September, driven by a surge in rent costs.

Prime minister Sheikh Nasser Al-Mohammad Al-Sabah highlighted during a weekly cabinet meeting the ruler's wish that government and parliament focus speed up key projects such as tackling a rise in residential land prices and ensuring the welfare of citizens, Kuna said.

Finance minister Mustapha Al-Shimali said on Sunday the government will probably raise salaries in the public service, where more than 90% of Kuwaitis work, by the end of February, according to Kuna.

The government has said it wanted to conduct a study with the help of the World Bank on living costs in the Gulf Arab state before deciding on a raise in the public sector.

Abu Dhabi announced Sunday it was lowering the ceiling on annual rent rises, reducing the maximum increase to 5% from 7%. Office rents in Abu Dhabi have grown about 40% in two years, property consultancy Colliers said in October.

UAE Central Bank governor Sultan Nasser Al-Suweidi said last year rents were the main driver of inflation in the second-largest Arab economy. Inflation hit a 19-year high of 9.3% in 2006, the latest available figure.

The Abu Dhabi government expects the rent controls to be temporary and that supply in the property market would quickly catch up with demand and allow the market to "function without further government intervention", the executive council said.

"Large numbers of residential and commercial properties will become available in the short-to-medium term," it said.

Rents caps such as those and Abu Dhabi have a limited impact because they only apply to lease renewals, said Giyas Gokkent, head of research at the National Bank of Abu Dhabi (NBAD).

Some landlords simply terminate the lease when they want to raise rents.

"The government is trying to bring inflation down, but it may not be as effective as it would like it to be," said Gokkent. (Reuters)

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