Abu Dhabi’s soaring rents are believed to be responsible for more than half of the rate of inflation in the UAE say industry experts, a situation which risks affecting other basic services in the emirate such as the cost of education and wages.
Thus far, inflation has not hurt local businesses, according to Gulf News. One reason cited for this is the fact that some $19 billion worth of foreign direct investment has been pouring into the country since last year.
The government is currently working on the correction of the legal framework by introducing new laws, which can help to ease the pressure and risk of a rise in inflation.
"Despite an expected slowdown in the rent hikes in Dubai, rents in Abu Dhabi are expected to further rise, while we find in other GCC countries, where rents did not record substantial increases, the real inflation rates are relatively low," said Steve Brice, regional head of research at the Standard Chartered Bank.
"We have also reduced the relative weight of housing in our basket for the UAE to 32 per cent, compared to the government's announced weight of 36.1 per cent, and that is due to the fact that many UAE nationals prefer to own houses rather than take rented accommodations," he added.