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Tue 4 Mar 2008 02:00 PM

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Qatar rent cap to slash inflation 40%

Two-year rent freeze could help cut inflation in Gulf state, which hit 14% last year, NBAD says.

Qatar rent cap to slash inflation 40%
RENT CAP: NBAD said Qatars rent freeze could cut inflation by 40%. (Getty Images)

Qatar's decision to freeze rent increases for two years could help reduce inflation in the Gulf Arab oil producer by about 40%, the National Bank of Abu Dhabi (NBAD) said on Tuesday.

Qatar's cabinet decreed on Sunday that landlords would not be able to raise rents on all contracts signed after January 1, 2005 for a period of two years, newspapers reported on Monday.

Inflation in the world's largest exporter of liquefied natural gas hit 13.74% in the fourth quarter, just off a record, as rents - which have a 20.7% weighting on the country's consumer price index - surged 27.7%.

The rental freeze is "likely to shave off roughly 40% of the annual inflation figure", Giyas Gokkent, head of research at NBAD, said in a note, referring to the contribution of rents to inflation last year.

The measure could, however, create "pent-up inflationary pressure", Gokkent said. Qatar's previous rent cap, which expired last month, was 10% per year.

In the UAE, Dubai and Abu Dhabi both capped rent increases at 5% this year, down from 7% last year, in a bid to contain real estate price inflation. But the cap was not protecting new tenants.

"Rent hike caps have had limited success in the UAE in terms of bringing down the inflation rate because they applied to existing contracts," Gokkent said. (Reuters)

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