New inflation figures for Qatar hint at expensive year for tenants

The cost of living in Qatar remained largely the same from January to February, though increases in housing and other categories suggest that 2015 may be another expensive year for residents who rent their accommodations.

The consumer price index increased a modest 0.1 percent last month compared to January, according to the latest consumer inflation report from the Ministry of Development Planning and Statistics.

Photo for illustrative purposes only.

Dan A'Vard/Flickr

Photo for illustrative purposes only.

This was primarily due to a 0.74-percent monthly rise in the cost of housing, water and electricity, which makes up the largest share of most household’s expenses.

That’s equal to or higher than the comparable increases in 11 of the past 13 months, although a methodology change by the ministry means the figures are not perfectly equivalent.

February’s figures hint at the possibility of 2015 being another costly year with residents who already grappling with rapidly rising residential rents.

If housing prices continue to climb at last month’s pace for the rest of the year, tenants would face an 8.8 percent annual rise in accommodation costs.

That would outstrip last year’s 7.3 percent increase in the comparable basket of rents, fuel and energy.

Land speculation

There are two related factors that are primarily responsible for the spiraling escalation in housing prices.

Firstly, Qatar’s population continues to grow by leaps and bounds, and the country’s real estate developers are failing to construct a sufficient number of new homes to keep pace. The shortage is particularly acute in the low and mid-range market.

Secondly, rental rates are correlated to the price of land, which has been rising rapidly.

A recent report from the Institute of International Finance – a global group of banks, insurance companies and other organizations – suggested this has been caused in part by property owners looking to profit from Qatar’s development boom and hints relief may be on the horizon:

“Land prices, up by 93 percent in 2014, have been driven by speculative demand with the increase in government project execution. A recent decree governing real estate expropriation for the public benefit could dampen this activity.”

Pricier clothes, cheaper transport

Other categories of consumer goods that showed a month-over-month price increase in February were clothing and footwear (0.49 percent); furnishings and household equipment (0.38 percent); and food and beverages (0.2 percent).

Photo for illustrative purposes only.

Omar Chatriwala / Doha News

Photo for illustrative purposes only.

By contrast, the prices of goods in several other categories registered a decline and helped slow the increase in the cost of living. This includes transportation (-0.93 percent); restaurants and hotels (-0.1 percent); and miscellaneous goods and services (-0.4 percent).

The costs of healthcare and education – both of which are tightly controlled by the government – were flat in February, as were the costs of communication services, tobacco and recreation and culture.

The consumer price index is calculated by comparing the cost of an average basket of goods purchased by residents in a typical month.

Officials recently readjusted that basket of goods to reflect changing consumption patterns. Additionally, the base year against which current prices are compared was also changed.

However, the ministry has not released recalculated figures using its new methodology for 2014, preventing year-over-year comparisons that help put monthly changes in context by showing trends and eliminating seasonal variability.

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