Friday, January 12, 2007

Economist Intelligence Unit on rent caps in Dubai

Thanks to The EclectEcon for the tip to this Economist story. I don't buy the EIU's analysis of rent caps in Dubai for two reasons: (1) I anticipate that enforcement will be ineffectual (more bluntly, it's window dressing), and (2) (more speculatively) I think the number of units coming on line is beyond the needs of the market already.

Many of those coming to the Emirates Economist are searching for information on inflation in the UAE. Here's what the article says about UAE inflation:
Inflation in Dubai last year was anywhere between 8% and 20% depending on who you ask (the UAE Central Bank, the IMF, commercial banks and, last but not least, the Economist Intelligence Unit). The consensus was around the mid-teens--too high for comfort--and this was beginning to hurt Dubai's competitiveness.

Firms were forced to hike salaries to keep staff, and then pass those costs on to customers. GEMS, a leading operator of private schools in Dubai, announced an increase in fees of up to 70% for 2007, blaming higher teacher salaries and rents. Privately, some managers of multinational companies said that they had shelved plans to expand their regional headquarters in Dubai, because it was too expensive compared with alternatives such as India, Eastern Europe or Ireland. They also dislike the uncertainty that inflation brings.
That's about right. But do notice, much of the inflation has come about because Dubai, and the UAE in general, is growing and attracting investment.

Related: Lastest on imported inflation and the UAE's dollar peg.

Later: The Economist, also, notes that "China is choking on its own success".

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Anonymous Radha said...

The number of units currently under construction seem more than adequate for the current population. But what about the expected growth in population. Are there any projections for the population growth expected in Dubai?

10:31 AM  
Anonymous said...

This can't really have effect, I think like this.

2:17 AM  

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