Qatar to see sustained upward pressure on rents: Oxford Economics
June 28 2022 08:49 PM
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Qatar, which stands out for the sharpest rise in housing inflation in the Gulf region, is slated to see sustained upward pressure on rentals in the coming months owing to FIFA World Cup, according to Oxford Economics.
"We look for sustained upward pressure on rentals in Qatar in the coming months amid an upswing in activity related to the football World Cup later this year," Oxford Economics said in its latest research report.
Rental prices will likewise firm in the rest of the GCC (Gulf Co-operation Council), spurred by higher demand from nationals and returning expatriate workers post-pandemic, it said.
The robust outlook will support hiring across the region and draw in foreign workers, leading to further recovery in housing demand and sustaining the rise in the rental component of CPI or consumer price index.
These increases will be weighed against the impact of higher interest rates on demand, even if regional central banks don't follow the US Fed hikes in full.
As external inflationary pressures moderate, it said domestic factors, stemming from the strength of the regional economic recovery and its impact on demand for housing and services; will pull inflation in the opposite direction.
The housing segment, which makes up an average of 27% of the (Gulf) region’s consumer basket, almost as much as food and transport combined, is no longer a drag on headline inflation rates, primarily due to higher rental prices.
"Qatar stands out for the sharpest rise in this category, in excess of 5% year-on-year in May, following a five-year period of falling prices," the report said.
Overall, Oxford Economics revised up its inflation forecast for the GCC to average 3.2% this year, up from 2.8% forecasted six months ago, but will begin to ease in the second half (H2) of 2022.
However, the GCC's rate of inflation will remain below that of most advanced and emerging markets with inflation to average 7.5% globally this year, it said.
"We believe the GCC inflation is nearing its peak," it said, adding the drivers of higher inflation in the GCC are similar to those in other regions, with food and transportation seeing some of the largest price increases.
It found that the GCC households have been insulated from sharp price increases by food and fuel price caps, more limited stimulus in the last two years that forestalled the build-up of domestic price pressures, and the strength of US dollar-pegged currencies, which have dampened import costs.
"A strong US dollar, to which local currencies are pegged, will continue to dampen imported inflation," Oxford Economics said, adding local currencies have surged in tandem with the US dollar, with nominal appreciation varying between 4.7% and 8.5% since end-2020.
"Our view that the US dollar will remain strong, supported by the hawkish stance of the US Federal Reserve, suggests imported price inflation will remain contained," the report said.
The comparatively modest fiscal and monetary stimulus deployed by the GCC governments in response to the coronavirus pandemic and still constrained liquidity (particularly in Saudi Arabia) have forestalled the build-up of domestic price pressures.



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