17.6 C
Doha
Friday, February 26, 2021

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.
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.
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.

Thoughts?

40 COMMENTS

Subscribe
Notify of
40 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
MIMH
MIMH
5 years ago

I don’t know the background of the person that makes these statements but this is simply not true.

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

There is no causality link between the two even if the two events appear linked. You could make the same link between the increase in CO2 in the atmosphere over the last 10 years and the rise in rental rates in Qatar. It’s nonsense.

Peter Kovessy
5 years ago
Reply to  MIMH

Hi NIMH – Researchers at Qatar National Bank frequently advance this argument. Their data shows rental rates typically follows movements in land prices – both up and down – with a six-month lag. Here’s one report as an example: http://www.qnb.com/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1355505319193&ssbinary=true

Michael Fryer
Michael Fryer
5 years ago
Reply to  Peter Kovessy

Correlation does not prove causality. That’s the point MIMH is trying to make.

You could just as easily say that rent prices are correlated with the price of eggs – as egg prices rise and fall, so too do rents.

MIMH
MIMH
5 years ago
Reply to  Michael Fryer

Thank you at least one person understands!

Daniel Schriefer
Daniel Schriefer
5 years ago
Reply to  MIMH

Actually statistics were invented to fool people.

Michael Fryer
Michael Fryer
5 years ago

Please provide research to justify your assertion. Statistics, if possible. Then I will be convinced… wait a minute…..

thedrizzle96
thedrizzle96
5 years ago

I mean considering the number of “scientists” on here, there seems to be gaps in their understandings of the scientific rules that run the universie and their lives. This deductive approach is absolutely fine, the arguments over causality are really more about context, another common dispute in the social sciences of qualitative study. So although, we are all seeing perceived shortcomings (valid or not, seemingly valid in the eyes of those who are living here and have some existing epistomological views, I don’t disagree to be honest), they’re no less right or wrong than many scientific theories or hypotheses

Rapha31
Rapha31
5 years ago
Reply to  Michael Fryer

The rent prices are correlated to what the landlords think they are entitled to be paid. Re-evaluated every end of tenants contract.

MIMH
MIMH
5 years ago
Reply to  Peter Kovessy

Do they think we are stupid? Researched at QNB are probably on the pocket of Qatari landlords and push this argument at the behest of their masters. Or they are just useless or lazy at their jobs.

CrazyQ
CrazyQ
5 years ago
Reply to  MIMH

QNB’s statements are in contrast with how the market actually works.

The price that developers are willing to pay for land should be reflective of the end value of the completed development, which is usually determined by the anticipated rental income. Rents will continue to be primarily dictated by supply and demand for built stock. The current surge in land prices is mainly based on speculation that rents and end values will continue to increase significantly into the future.

Land prices only impact on rental rates over the longer term if the price of land reaches a point that it becomes unfeasible to develop it and make a return to reflect the risk of development or because higher returns can be derived from continually selling the land in a
rising speculative market. In these scenarios commencement of construction is often
put on hold and the land remains undeveloped, leading to a shortage of completed stock in the future. Most real estate projects in Qatar take at least three years from initial consideration through to completion. Due to the time lag of development the potential shortage in new supply caused by excessive land prices now is unlikely to be felt in the market or impact on rents for several years.

Inelasticity of supply in the real estate market is partially to blame for the current rental inflation scenario. Few new developments commenced over 2009/2010 due to the downturn in the real estate market over this period. Rental rates being achieved at that time made anticipated financial returns from development unattractive with developers uncertain of the future and putting projects on hold leading to the shortage in supply that is being felt now. The current boom in demand has increased rental rates but the significant time lag required to design a project, obtain permits and construct the development mean that supply is unable to react to meet this demand.

MIMH
MIMH
5 years ago
Reply to  Peter Kovessy

I’m sorry I hate to critise but isn’t the role of a journalist to question what they are told, rather than report it verbatim as if it was a fact?

Michael Fryer
Michael Fryer
5 years ago
Reply to  MIMH

Did you actually look at the graph on page 13 of the report, that boldly asserts the “6 month lag” theory? If that were the case, we should have witnessed rents fall in the first half of 2014. The graph clearly shows the reverse – rents rose.

Not only is it ridiculous to mount the correlation/causation argument, a rudimentary examination of data shows there isn’t even a correlation.

Pete
Pete
5 years ago
Reply to  MIMH

You get reporters and then you get investigative journalists and they’re not the same. Investigative journalism is a very time consuming and consequently expensive thing. I’m not sure if Doha News employs full time journalists/reporters…I doubt it. So a little leeway should be allowed.

Cerebus
Cerebus
5 years ago
Reply to  MIMH

This statement could easily be proven wrong simply by looking at the mid-to-high occupancy rates and assessing the full supply and demand of the market. It seems to me that the data used to make these reports is flawed, but that is just casual observation. West Bay is a prime example. There are many towers there with only a few apartments that are occupied while the rest of the building sits empty. That would indicate a high supply of apartments. However, the rental rates for these apartments still remain high. The land they are sitting on is already purchased, and its value increasing doesn’t increase the initial investment and there is not a correlation to property tax. The increase in rents could then be true on new build, but not on current. That is simply the landlords raising the rent to keep up with the rates that others charge, which is collusion. It would be nice to have a study conducted independent of the bank that finances the construction projects and reports the true occupancy rates and supply. Example – there is a compound near to mine where more than 50% of the villas are empty, yet they raise the rents year on year? Supply is not as big of an issue on the upper end.

MIMH
MIMH
5 years ago

You need to break the rental market down if you want to make meaningful sense of the market. There is a glut of properties at the high and middle end but at the lower price brackets there is a shortage. This shortage is caused by two factors, 1. Most investors are putting their money into high end properties and therefore hopeful of getting high rents, 2. They are demolishing a lot of the affordable housing for the lower income workers. This has not been replaced.
Even though there is plenty of high end properties to go round the landlords are trying to increase the rents as much as possible. (It helps when there is only a few major players who can collude on prices). This leaves the tennant with two optionns, pay up or find somewhere else to live. There are alternatives that are cheaper but no one wants to have to move each year and the landlords count on this.

Not Drinking The Cool-Aid
Not Drinking The Cool-Aid
5 years ago
Reply to  MIMH

price collusion is correct. Prices move up very fast and come down very slowly. Characteristic oligopolistic collusion

Rapha31
Rapha31
5 years ago
Reply to  MIMH

And because they can.

The Reporter
The Reporter
5 years ago

Never mind. Only 7 years to go and it will all be over. Qatar will have it’s shiny new country of empty hotels and houses so rental prices should stabilise a bit.

A_qtr
A_qtr
5 years ago
Reply to  The Reporter

Just like over half of the EU but not as bad as Detroit

Rahma
Rahma
5 years ago

Accommodation in GCC already very expensive. Every year more expensive. Need to balance out somehow.

MIMH
MIMH
5 years ago
Reply to  Rahma

Not in Saudi. You could move there

Michael Fryer
Michael Fryer
5 years ago
Reply to  MIMH

I think some people might be sickened to see how rent in Doha compares to rent in Riyadh. Take a look (and these prices are PER YEAR)

http://saudi.dubizzle.com/en/riyadh/property-for-rent/villas-for-rent/search/

A_qtr
A_qtr
5 years ago
Reply to  Michael Fryer

Probably true but not as sick when they learn how lovely life in Riyadh can be

Rapha31
Rapha31
5 years ago
Reply to  A_qtr

But why is it more expensive in Qatar?

Rahma
Rahma
5 years ago
Reply to  MIMH

Why do all discussions have to end with ‘if you don’t like it leave’? If it was that simple everyone would have left a long time ago.

MIMH
MIMH
5 years ago
Reply to  Rahma

Er but it is that simple unless you are Qatari.

Azk
Azk
5 years ago
Reply to  MIMH

then why have you not left till now. I find you complaining about everything in Qatar. So why don’t you just get up and get out?

MIMH
MIMH
5 years ago
Reply to  Azk

Well obviously you are very selective in reading the comments I make. I quite like to here for myself, yes there are some bad things but so far the good outweighs the bad. I don’t understand those that say other places are better yet still stay.

Anonymouse
Anonymouse
5 years ago
Reply to  Rahma

Well, I don’t mean to be argumentative, but at the end of the day, isn’t it that simple? The only people stuck in Qatar are the nationals. There is a well-worn path and flood of people leaving monthly for the UAE and other greener pastures, it would be fairly easy to get the necessary information and join them.

Michael Fryer
Michael Fryer
5 years ago
Reply to  Rahma

Because in other countries the discourse would be ‘if you don’t like it, change it’. This isn’t our country, we can’t, and shouldn’t, expect it to change.

thedrizzle96
thedrizzle96
5 years ago
Reply to  Michael Fryer

That seems a bit optimistic really, in the UK they have political parties essentially running on the premise of if you don’t like it leave

Jaded
Jaded
5 years ago
Reply to  MIMH

let’s not get crazy

ism
ism
5 years ago
Reply to  MIMH

and the rents in saudi are also increasing maybe not at the same rate as Qatar. So stop b**lsh*****g.

Oracle
Oracle
5 years ago

“This was primarily due to a 0.74-percent monthly rise in the cost of housing, water and electricity,” Did they increase pricing of water and electricity in Qatar?

AnonymityBreedsContempt
AnonymityBreedsContempt
5 years ago

I can’t believe the outrageous prices for terrible clothing here.

MIMH
MIMH
5 years ago

That is very true. Over priced second hand stuff from Europe!

Yousef
Yousef
5 years ago

STEAL from the poor that come to help build your country ……and the sands of time will come back to get you.

MIMH
MIMH
5 years ago
Reply to  Yousef

If you consider you are being stolen from I would leave. Who wouldn’t be stupid enough to get robbed every month in the same place.

Kallas
Kallas
5 years ago

One of the problem I have observed that the government allowed “forienger tenants” to sublet to other multiple tennants in the same flat regardless if they are a family, a couple or single occupants… they also allow these tennants to modify the flats like installing partition on flat space which was not intended for bedroom, this creates a multiplier effect on the rental rates. Most of these “forienger tenants” saw an opportunity on this and they have more flats or apartment for rent… they are not worried about their day job or monthly income because they are totally covered on the monthly gains from the rents which they are enjoying with a minimum 20% mark-up from the original rental rates.

Waveydavey
Waveydavey
5 years ago

My rent goes up 1000qr a month every year, and my housing allowance stays the same…

Related Articles

- Advertisment -

Most Read

Student scammed for QR 6,000 while ordering pizza online

0
With scam attacks on the rise, it's essential to protect yourself from fraudsters.  A Qatar University student who ordered a pizza worth QR 31 was...

Subscribe to Doha News below!

To be updated with all the latest news, offers and special announcements.