DOHA: Falling land prices in Qatar might keep a lid on the rental inflation.
The QNB Group that analyses land transaction data based on weekly statistics published by the Ministry of Justice, noted yesterday that the cost of land had fallen in the last six months.
According to the Group, the fundamental driver for real estate prices is the cost of land.
The drop in land prices since July 2013 is a leading indicator for rental inflation six months ahead.
The increase in rents is therefore likely to slow over the next six months.
There is already evidence of this as annual rental inflation slowed to 5.6 percent in November 2013 from 6.7 percent in August 2013, the Group’s Qatar monthly economic monitor for January 2014 said.
The Group expects further pick-up in population growth to drive consumer demand, leading to a rise in non-rent inflation.
Planned heavy investments in major projects in 2014 are likely to accelerate economic growth, which could lead to supply bottlenecks pushing up prices.
The strong inflow of expatriates needed to work on projects is likely to increase demand pressures throughout the economy.
The research note said the number of people in Qatar grew by 11.4 percent year-on-year in December 2013 to reach 2.05 milllion.
Population growth in recent months has been driven up by the large ramp-up in infrastructure spending in preparation for the 2022 FIFA World Cup.
QNB estimates an average growth in the resident population of 10.9 percent for 2013.
The larger population will lead to higher economic growth by boosting aggregate demand and investment in housing and services.
The report said Qatar’s international reserves rose to their highest level in six months in November 2013, up $6.4bn since end-2012 to stand at $39.6bn.
The reserves have been steadily rising over the years on large current-account surpluses.
Going forward, QNB Group expects the reserves to continue rising gradually for the remainder of this year and in 2015.
The Peninsula
