(MENAFN- The Peninsula) A combination of higher land prices and steady growth in population rate will continue to put upward pressure on Qatar's rent inflation. The country's population grew by 9.7 percent year-on-year in November 2014 to reach 2.27m. Land prices increased by a staggering 73 percent year-on-year in October 2014.
The latest population figures for November are in line with QNB Group's forecast of 10.1 percent average population growth for 2014 - one of the world's highest population growth rates. In turn, the larger population will feed into higher economic growth by boosting aggregate demand and investment in housing and services, QNB Group analysts said yesterday. 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.
Rent inflation has accelerated in line with QNB projections, tracking movements in the underlying price of land. The record 73 percent rise in land price will continue to put upward pressure on rent inflation with a six-month lag.
"The combination of rapid population growth and higher GDP per capita are leading to a strong increase in the demand for housing, pushing up real estate prices. As the population expands and per capita income rises, both a base and an income effect push land prices higher. This is likely to continue over the coming years, in line with the favourable outlook for the Qatari economy", says QNB's monthly monitor.
QNB forecast overall CPI inflation to average 3.5 percent in 2015. Domestic inflation will mainly be driven by rising rents in response to higher land prices and the growing population. Lower international food prices are likely to keep foreign inflation low, thus partly offsetting the rise in domestic inflation. However, there is a risk that large investment spending and the growing population could lead to supply bottlenecks owing to limited domestic capacity. This could push up domestic prices more than expected.
The report also said declining oil prices continue to negatively impact investor sentiment. Overall, all regional markets ended in negative territory in November, as investors preferred to book profits.
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