Are more rent hikes looming in the distance?
Propertyfinder’s Marketing Manager shares his forecast
July 4, 2013 7:50 by Maha El Gazzar
The real estate sector in Dubai has been experiencing a downfall ever since 2009, when it experienced a major setback due to the economic crisis. However, analysts have been giving positive feedback on the industry, which is now reporting more demand, and hence, increased prices.
Newspapers reported several rent increases last month in many areas of the emirate, with Dubai Marina and Downtown Dubai being the popular ones. Kipp sat down with Bharat Kumar, the Marketing Director of the UAE-based property portal, propertyfinder.ae, to get some insights on the future of rents in Dubai.
Established in 2007, Propertyfinder has 60 people across its four offices in the UAE, Qatar, Egypt and Lebanon. The company plans to open in five more countries by early 2014.
How are the Dubai rental trends looking in Q4 of 2013, and how are they most likely to change next year?
Overall, as the market stands today, rents are likely to rise in the second half of this year. Rises will vary based on the location, property type and other factors, such as maturity of the development and amenities. Two and one-bedroom units are the most popular searches when it comes to renting and they tend to be apartments according to our statistics. The areas affected by the increase include Palm Jumeirah – 25-30 per cent; Dubai Marina – 20-25 per cent; Downtown Dubai – 25 per cent and The Greens – 35-40 per cent. We expect rents to increase even for three bedroom properties across the board, but the increase will again vary based on location and the type of development.
And how are these trends comparing to Abu Dhabi?
Dubai has seen greater increases than Abu Dhabi. Once again, the rents vary from location to location, so places like Al Reef and Reem remain ever popular and the rents tend to be higher. Due to oversupply in some areas, older developments have struggled from a rent rise perspective.
Are there currently any initiatives by Real Estate Regulatory Agency (RERA) to curb rental hikes?
RERA has a rental price index, which provides clear guidance on by how much landlords can increase rents – this, of course, applies to tenants already in a property. The guide is also a good tool for new renters, but ultimately, the rental price for new tenants is determined by what the landlord is willing to settle for. Also, some landlords do navigate around this rental index by claiming that they want to sell the property or move in themselves. Renters are advised to have clear contracts that outline rents, time periods and notices, wherever possible, and they need to register the tenancy contracts with RERA through Ejari, in case of any disputes. Ultimately, RERA does provide a process where tenants can raise complaints and cases of unfair rental practices.
Do you see any changes in the way customers look for houses now, than they did in the last year?
The market is more buoyant than last year and searching for properties have had to adapt to the current market situation. The way people look and the criterion that is important to them varies from individual to individual and family to family. Things like budget, location, need for amenities, etc., plays a big part. People are generally more aware of market dynamics, regulations, etc., so they do take this into account while searching. As rents have risen sharply, people are looking for properties that provide better value for money. As such people are looking at up-and-coming areas, less popular locations or communities and in some cases, even smaller options. People are also looking towards staying longer as they know or can predict rent increases.
What best advice would you offer for someone looking to rent in the next period?
Rental prices are certainly on the rise, so if you are looking to move then, the sooner you do so, the better. [However], rents creeping up will mean that the market is recovering and good times are in sight.
In your opinion, do you believe that the real estate industry is bouncing back to its status before the economic crash?
It is not the same, as it was prior to the crash, and that is a good thing. Overly aggressive price increases and flipping of properties can damage a market, however, from website traffic and inside market knowledge, we have witnessed a number of interesting trends that point to a fast growing market. Of course, we have seen both sale and rental prices increase sharply. Secondly, a positive growth in demand for high-end properties and developments has been very strong. New and off plan product launches have been hugely oversubscribed with long queues. Projects that have either been delayed or were on hold have now restarted and of course, mega new projects have been announced – like the Mohammed Bin Rashid City. There are lots of investors in the market coming from all corners of the globe, including the Arab region, the Indian sub continent and Europe. The cranes are back, confidence is high but, so are the prices.
What can the industry do at this time to avoid another crash?
Everyone has a role to play. Renters and buyers are more aware than last time. There are some more regulations in place than before. Developers have taken certain measures, such as inserting payment conditions, as well as, time periods before properties can be resold to control speculation. However, speculation will always exist in a growing market and can never be completely eradicated.