Dubai Inflation Drops, Housing Costs Persist

Dubai Inflation 2025 April: Slowing Pace, but Housing Pressure Remains

Dubai's inflation rate decreased to 2.3% in April 2025, a significant reduction from March's 2.8%. This marks the lowest annual rate of price increase since mid-2023, primarily due to a notable drop in fuel prices. However, housing costs continue to be the major driving force behind the rise in the Consumer Price Index (CPI).

Drop in Fuel Prices Eases Inflation

Transportation costs, which account for about 9% of the CPI basket, declined by 7.6% year-on-year in April, compared to a 3.3% drop in March. This is mainly due to the decrease in the price of Super 98 petrol, which was 18.4% lower in April than a year before. In May, this price is 2.58 dirhams per liter, still 22.8% less than the 3.34 dirhams in May 2024.

Projections suggest oil prices could average around $68 per barrel in 2025, which would continue to lower transportation costs and thereby inflation.

Housing Continues to Dominate Inflation

Housing expenses account for about 40% of the CPI basket, playing a defining role in inflation trends. Although annual rental inflation decreased to 7.0% in April from March's 7.2%, it remains high. Month-on-month, rents rose by 0.4%, unchanged from March.

The annual growth in rental prices – standing at 9.8% in April – has not been this low since December 2021. This indicates that housing pressure might ease in the future, though the sector remains the most significant inflationary factor.

Education and Healthcare: Moderate Growth

Education costs (with an 8.2% weight in the CPI) increased by 2.5% year-on-year in April, compared to March's 2.8%. Healthcare costs (with a 0.9% weight) rose by 3.0%, a slight dip from March's 3.1%.

The cost index for private schools was set by the educational authority at 2.4% for the 2025/26 academic year, lower than the 2.6% for 2024/25, and is expected to further moderate education-related inflation.

Other Product Categories: Low or Negative Inflation

Consumers experienced low or negative inflation in several other product categories. Food and beverage prices fell by 0.2% year-on-year. Restaurant and accommodation prices grew by 0.6%, following a 0.3% rise in March. Clothing prices, however, fell by 2.8%, likely due to ongoing promotions and discounts. Household furniture and equipment prices increased by 0.5%, slightly above March's 0.4% increase.

Moderate Inflation Outlook for 2025

In the first four months of the year, the average annual inflation was 2.8% in Dubai, consistent with earlier forecasts. Experts now estimate the annual inflation at 2.5% for 2025, down from 3.3% in 2024. Moderating oil prices and slowing growth in housing expenses could contribute to easing inflationary pressure.

Nevertheless, the high level of housing costs and their dominant weight in the CPI still warrant attention, as any potential new price rise could quickly reverse the achieved inflation reduction.

(The article source: CPI inflation in Dubai index.)