Deflation takes hold in Abu Dhabi as housing costs fall

July drop in consumer prices was the biggest since at least 2015, and the sixth in seven months
Deflation takes hold in Abu Dhabi as housing costs fall
By Bloomberg
Wed 14 Aug 2019 03:39 PM

Deflation is becoming entrenched in Abu Dhabi, the UAE’s capital.

Consumer prices in oil-rich Abu Dhabi declined for a second consecutive month, falling 1.4 percent in July from a year ago, according to a release by the emirate’s statistics service.

The drop was the biggest since at least 2015, and the sixth in seven months, according to data compiled by Bloomberg.

An index of prices for housing, water and electricity, which holds the biggest weight among a dozen constituents, dropped 3.6 percent last month.

“In the foreseeable future, it is hard to see the housing sector bottoming out, given current market conditions,” said Mohamed Bardastani, the Dubai-based senior economist at Oxford Economics.

“A mismatch in the supply and demand curve and weak employment numbers have weighed down on housing prices, and that is the case in both Dubai and Abu Dhabi.”

The deflationary momentum began in the UAE, and neighbouring Saudi Arabia, because the introduction of value-added tax in 2018 created a high base for comparison.

The prolonged slump in housing costs that’s now putting broader price growth into negative territory has kept it going.

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