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What is happening with Dubai’s rents?

What is happening with Dubai’s rents?

In spite of reports that Dubai’s does not need a rent cap in 2009, Dubai’s ruler has issued a decree halting any rent increases this year. Why?

January 20, 2009 12:12 by

Dubai’s ruler Sheikh Mohammed bin Rashid Al Maktoum has issued a decree that stops any increase in residential and non-residential property rent in 2009 for the tenants who renew their contracts signed in 2008, reports official news agency, WAM.

Landlords can impose increases in 2009 only if the rent they charged in 2008 is more than 25 percent below the average market rate set by Rera’s 2008 rental index.

Mohammed Ibrahim Al Shaibani, director of the Dubai Ruler’s Court said the decree was aimed at curbing the increase in rents in the emirate, and to ensure the sector’s stability.

Interestingly, Marwan bin Ghalita, the CEO of Dubai’s Real Estate Regulatory Authority (Rera) recently told Gulf News that a rent cap was not needed this year: “We don’t need a rent cap this year. We need to freeze everything. 2009 is a tough year and we shouldn’t interfere with rents too much,” he said.

A recent report published by Asteco supported Ghalita’s claim by stating that rents in Dubai did not rise in the last three months of 2008, rising a mere four percent in the whole of 2008.

So if rents were not rising at all, what prompted a decree from Dubai’s ruler? It sounds like a rent cap to us (albeit a complicated one).

Is it a way to persuade the evacuating population of the city to stay back? Or is it just a step to regulate the so far unrestrained rent sector? And what about those signing new rent contracts? Will they benefit from the decree?

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  1. Joe on January 20, 2009 1:08 pm

    Again, another knee jerk reaction / decision well thought out… NOT

  2. mohamad on January 20, 2009 1:14 pm

    I see this not as a rent cap but removing the cap on the lower side of rents or old rents. The new rents would most probably be around the average – 25% but the old rents could be less than 50% than the average. Hence, somebody renting for several years (before the property boom) who was dealing with a 5% rent increase can be faced with a 50% increase on thier rent.

  3. Michelle on January 20, 2009 1:59 pm

    This is not a rent freeze at all! It gives landlords a golden opportunity to increase rents by whatever margin they desire if their tenants rent is not within 25% of RERA’s index. Essentially it undoes all the previous rent caps and aims to bring every lease in the Emirate in line with the vastly inflated and artificial rents of 2008. Great work!! Watch the exodus of employees increase!!
    Did the same committee who presided over the ID debacle have a hand in this ridiculous edict?

  4. Bewildered on January 20, 2009 10:50 pm

    The new decree will only lead to massive increase of rents for 50-60% of Dubai’s tenents. The rent index is utterly useless at a time when the world is facing a recession, jobs are badly hit in the UAE and salaries have stagnated. As Mohammed and MIchelle have rightly pointed out that bringing rents up to 2008 levels is insane- it was way too high for most people.
    I love Dubai and am grateful for the country’s hospitality but this new rule has forced me to reevaluate my long term plans here.

  5. Obiwannn on January 21, 2009 9:14 am

    Anything that is made to reassure people is a good move in these days. I will also be happy to see something similar for financing. Dubai financial institutions have increased their rate by up to 2%. The previous rates were already very high (8%) and instead of helping people who already have their heads in the water due to the economics, it pushes them more down. Whereas everywhere in the world, profit rates are going down by large numbers, Dubai is a costly exception… No good for confidence in these days.

  6. Naresh on January 21, 2009 9:59 am

    What about rents for apartments of ‘Wasl’ ( Shk Hamdan properties) or Dubai Dev Board. These apartments are rented at very very low prices – will these rents be raised to create an equitable market?

    Believe there are people paying abt AED 30K for a 3 B/R apartment on Zabeel Rd!

  7. LeVerte on January 21, 2009 10:20 am

    Clarity reigns….and its actually good news. I was spitting yesterday with what I thought was an attrocious decision. However, todays clarifications show that is (as in my case) your rent is between 36% and 45% below the average then the landlord can increase by 10% this year. For me that will be 16k. Worse than I’d hoped, better than I thought yesterday…despite the ‘no rent increase’ headlines – which as usual were complete bull. The Emirates Business 24/7 has all the details in todays edition.
    ps…..the bands only seem to relate to new rent amounts…..they’re significantly higher than most people are actually paying, especially in ‘new’ Dubai.

  8. Merilyn on January 21, 2009 12:35 pm

    A well planned cap or hat whatever you may call it
    First the landlords could not increase the rental steeply for old tentants as the rent cap was fixed to 5% – 7% and they used to evacuate old tentants on all pretexts to ensure that they made more money when a new tentant leased the place.
    Now since there is no space for any increment in rental on new bldgs and apartments – as that section is already saturated to the brim, they find a new way of making money, landlords will make the difference from old tenants.
    The idea of the facilities matching the rent etc is for the say only, something similar to Salik being created to ease road congestion…. Landlords will now make their money on old tenants by increasing it by upto 24.99% oops 25%
    Now despite the road traffic being eased by itself due to current economic conditions – SALIK still exists.
    Cap it This way or Hat it that way … no differnce to the common man!

  9. Peter on January 21, 2009 3:08 pm

    The freeze is not real because most of the old tenants will be faced with huge increases since the majority are well below the so-called index. Even if they can only put it up by 10% at a time, that i still too much especially in the current economic conditions! Either they make it a real FREEZE or keep the 5% cap. what they have done is simply ridiculous and will only worsen the situation. The index must not be based on 2008, which was the year of the Dubai Bubble! Everything was over-inflated to a completely non-sensical point. It should be based on 2006 figures as they were more sound. whoever did that on 2008 figures was thinking ONLY of the landlords’ pockets but not of the Dubai economy. Yes, more people will leave Dubai with this measure because middle managers who still might have their jobs (salary range of AED35K to AED45K) will no longer be able to afford living in Dubai in their current acccomodation. if they have to downgrade, the option of leaving is very tempting, especially for western expats who can live well within that rage back home. no one likes to downgrade…

  10. Dubai Rocks on January 21, 2009 4:21 pm

    If RERA will implement this Dubai Rental Index 2009 seriously before December 2009 then, I bet, it will help Dubai Government to reduce 20% plus population of Dubai.

    Who participated in the last 5 years boom of Dubai? I observed that the skilled manpower who arrives in last 5 years have a big hand in the Boom. So the same people will think with BRAIN in this crisis period, as now everybody wants their secure longterm personal goal.

  11. LeVerte on January 21, 2009 8:51 pm

    Naresh – not sure exactly where those appartments are, but the landlord can definitely put them up by 20%….there’s no 3 bed appartments anywhere that 30k a year isn’t more than 56% below ‘market value’. Its shocking. Bascially anyone who rented in 07 or 08 got shafted. Now they’re going after those who rented earlier and are YET to be shafted…..

  12. Manan on January 22, 2009 8:39 am

    IT IS a rent freeze guys!!
    the past few months had seen the rents falling… to the consumers delight. But finally, the government of Dubai has frozen the rents, to the high marks, therefore, eliminating any chance to the consumer…

    Be it salik, or emirates id, or rent caps, or housing fees, or knowledge dirham, or the 5-8000 AED driving license… DUBAI IS A TAX FREE ECONOMY!! – ya right!!!

  13. Aggrieved on January 22, 2009 5:03 pm

    La Verte -You seem to be new to Dubai.

    Building at Zabeel Road – also known as Shk Rashid building – has spacious 2 beds abt 24K, 3 beds abt 30K, 4bed abt 40K – even today!

    Wasl buildings charge abt 55 to 60K for 3 B/R-even today!!

    Somebody inform rents paid by tenants in DDB buildings.

  14. Jim on January 24, 2009 11:14 pm

    Although it says the rent freez but infact the old tenanats even if its only 3 years old (atleast 80%) will face a massive rent increase. Because the rents are more than 25% less than the market rate (if we consider what the arewise rent published in various news paper).
    The law says average rent, the area wise rent given is the maximum rates e.g. Qusais are two bedroom is shown as 100-120 k-Dhs/yr. Well this is not average this is peak, if you take the lower rent 35 K in many old bldgs. and new well furnished bldgs. 100 k Then average will be 73 K. Now while considering this various factor also should be considered e.g life of bldg, reserved parking, covered parking, health club, swimimg pool, Central A/C, security, maitenance, CCTV facilities, MATV facility, fire protection, children’s play area, etc. These facilities alon costs the tenant atleast 20-30% of the rent. If you consider all these there should not be any rent increase for the old building. Further the law does not clarify anything about -if the rent was increased in 2008 and as per that law no increase should be in the follwoing year.
    I think and request concern authorities to be fair and do a fair clarification based on rent in similar building considering all amenities. If not the landlords are going to ripoff the old tenants.

  15. Carole on January 25, 2009 9:05 am

    I agree 1000% with Jim since I fall under the category of people living in a 12 year old building, with 100 year old gym, no swimming pool, no proper security and paying 50% less rent which i guess makes sense???
    RERA should think of having an evaluation of buildings in each area because a brand new building with all the amenities cannot be in any way evaluated as an old building with no amenities whatsoever.

  16. Sunny on January 27, 2009 6:23 pm

    When Prices will be going to cut down in Abu Dhabi, please let us know

  17. NARESH on February 2, 2009 8:12 am

    I believe next year the rents would CONDENSE and there would be no need for rental laws. The ECONOMICS LAW “If supply is more than demand the prices should drop” will apply. Here the demand is going on continously declining and the supply on other hand would be continously rising. The effect is already felt in Q1 2009 with rents fallen down by 25% to 35% specially freehold. Next year it would be tenants market and landlords would have no way out but to reduce the rents considerably in order to keep the tenant instead of having the property vacant. Competition is good for business but Cut-throat competition would be a disastor. Patience would bear sweet fruits in the coming days, only thing is survival in these times or world crisis. Have faith in THE CREATOR and in yourself. Days never remain same, after every dark night there is a shinning day.


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