Abu Dhabi to control inflation

With inflation starting to spiral upwards at an alarming rate, Abu Dhabi's government is committed to as little government regulatory interference with the market as possible.

Like nearby Dubai, Abu Dhabi has been having inflation problems of its own as a high amount of demand and a low amount of supply has resulted in a shooting up of property values all over the prosperous Emirate.

However, Abu Dhabi is going to be taking steps that are somewhat different from the steps that Dubai is taking to deal with the inflation problem. While Dubai is enforcing strict regulation into the property markets within its borders, Abu Dhabi has made it a vow that beyond enforcing the rent cap that they currently have in place, they will not be putting any more direct government regulation in place in order to curb inflation within the property market.

The rent cap of five per cent that was put in place at the start of 2008 has not been enforced that well however, so many of the Abu Dhabi officials are confident that actually enforcing the cap will go a long way towards resolving many of the problems that are currently plaguing the market vis-à-vis inflation.

In addition to that however, Abu Dhabi is now committed to solving the problem through good old fashioned economics. According to a representative from the Abu Dhabi government, talks are already underway with many of the contractors working in the area to speed up the building of residential areas all over the Emirate. In this way, the Abu Dhabi government hopes to significantly increase the amount of supply available in the city and therefore bring down the inflation that has been going up primarily due to the imbalance between supply and demand.

Whether or not the plan will work at this stage is anybody's guess, since the first thing analysts will look for is whether or not the Abu Dhabi government can deliver on its promise for revamping efforts to bring residential supply up on a large scale in 2008. This is not the first time a UAE government has promised higher residential numbers and been unable to deliver and therefore seeing what happens in the next few months will do a lot towards convincing analysts whether or not curbing inflation is likely to happen in Abu Dhabi.

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