Dubai: Dubai’s successful bid for the World Expo 2020 had nothing to do with recent increases in cost of living and should not lead consumers to believe they are in for a rough ride.
Figures from the National Bureau of Statistics indicated that prices have been on the rise, with the consumer price index up 1.26 per cent in the third quarter compared with the same period last year. The beverages and tobacco index registered the highest increase at 17.32 per cent, followed by education (5.38 per cent) and food and soft drinks (2.86 per cent).
In Dubai’s rental market, the latest Cluttons report showed an average value increase of 22 per cent over the third quarter last year.
There has been a lot of buzz that the global fair is going to make living in Dubai more costly, and that the anticipated win has already been factored into the cost of goods and services.
However, these movements are far from historic highs and are certainly not driven by the World Expo 2020, according to Alp Eke, senior economist at National Bank of Abu Dhabi (NBAD). As of October 2013, residential rental prices stood at Dh83 per square foot on average compared to Dh150 per square foot in the same period of 2008. The overall UAE inflation for 2013 is also lower in comparison to previous years.
“Dubai Expo 2020 is definitely not the reason behind the increase in the cost of living and especially the rents,” Eke said. “I don’t agree with other analysts who claim that the Expo has a role in [the recent] rental price increase. Up until last week [November 27], nobody was sure Dubai will win.”
Eke admitted, though, that the Dubai Expo 2020 will bring an influx of tourists and investors and create additional upward pressure on the prices.
In the short term, he added, there could be further movements, but as the overall sentiment improves closer to the event, rates will stabilise and gradually adjust.
A major economic catalyst for the UAE, the World Expo is forecast to boost nearly all sectors. The world’s third largest event is expected to create 277,000 jobs and attract 25 million visitors.
At the moment, it may be too early for Dubai residents to fear their overall living expenses will skyrocket as a result of being the host city. Steve Gregory, managing partner at Holborn Assets, said it will depend on the amount of supply and demand. If there’s a surge in the number of people coming to the UAE to work, property rentals will considerably go up.
“On the other hand, if property is in plentiful supply because developers perceive expectations of need, rents could fall. Rents aside, there should be little impact on groceries or motor vehicles or clothing,” Gregory added.
Cluttons declined to comment on rents, but said in a statement that the much talked about “Expo boost” has already been priced into the real estate market, with property prices increasing recently.
“Dubai has already seen a surge in property prices and we expect a trend of more stable and sustainable growth to persist over the short term,” the company said.