Housing Sector Strains GCC Economies: Key Insights for Investors and Businesses in 2024
MUSCAT: A recent report from the GCC Statistics Centre reveals that the housing sector has made the largest contribution to overall inflation within the GCC region. In 2024, this sector experienced the highest inflation rate across all consumer categories, with a 5.7% increase that accounted for 90.1% of the region’s total inflation.
Among the member states, Saudi Arabia reported the highest housing inflation at 8.8%, followed by the UAE with 3.3%. Kuwait experienced a 1.2% increase, Oman 0.3%, and Bahrain 0.2%. Interestingly, Qatar saw a deflation rate of -3.3% in its housing sector.
Other sectors also exhibited inflationary trends: the restaurant and hospitality sector rose by 1.8%, while the culture and entertainment sector matched this increase. Education costs went up by 1.7%, followed by food and beverages at 1.5%, and goods and services at 1.1%.
Conversely, several categories recorded deflation, including health services (-0.2%), clothing and footwear (-0.7%), communications (-1.0%), tobacco products (-1.1%), furniture (-1.6%), and transport costs (-2.0%).
The average inflation rate across the GCC countries in 2024 was measured at 1.7%. Kuwait had the highest overall inflation at 2.9%, with both Saudi Arabia and the UAE at 1.7% each. Qatar recorded an inflation rate of 1.3%, Bahrain at 0.9%, and Oman at 0.6%.
Historically, the inflation rate in the GCC has varied significantly; it was 1.7% in 2020, rose to 2.4% in 2021, peaked at 3.1% in 2022, and then fell to 2.2% in 2023 before returning to 1.7% in 2024.
The report suggests that this stabilization reflects the effectiveness of economic policies adopted by GCC governments to manage inflationary pressures. It highlights a "relative stability in the region," attributed to reductions in global inflation and the stabilization of food and energy prices throughout 2024.
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The housing sector’s 5.7% inflation, notably impacting overall inflation in the GCC, signals increased costs for businesses dependent on real estate. This presents both a risk of elevated operational costs and an opportunity for investors and entrepreneurs to explore alternative sectors or innovate in housing solutions. Smart stakeholders should consider strategic investments in areas that may mitigate inflationary pressures or capitalize on the sluggish performance of other sectors like food and education.
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