08 November, 2006

No Dubai reduced rent cap

"Dubai is unlikely to follow Abu Dhabi's lead and reduce its rental increase cap below 15%, according to the chairman of Dubai Rent Committee quoted by 7Days. Abu Dhabi is capping increases at 7% a year. Dubai's rent cap expires at the end of 2006, but reports suggest rents and property prices will soften by 5% in late 2007." -ameinfo.com reported.

Yes Dubai Rents won't be capped down, and why should they be capped yet? The higher the rent the more it makes sense to buy an apartment. Not only that, the high rents also make it easy for developers to show that an investment in dubai means higher returns. The part where ameinfo reports the prices will soften by 2007 is also debatable. I think rents will dip alongwith prices by 2008 once most of the properties are handed over. But for now the higher the rents are kept the more promising Dubai real estate market becomes.
However I doubt the same would be true for commercial as in a previous post on uaec, it was discussed that commercial lands are and will continue to be in shortage. If anyone has insight on either please share.

8 comments:

poo said...

A rental cap will or a reduction in rental values will lead to the desegregation of the city. They wont let that happen

poo said...

To protest extremely high rent prices in Tel-Aviv a group of artists took to the streets wi cardboard "whores" attempting to show the city government that they "had enough of prices going up day after day.And we are tired of being the whores of the "landlords" Link

Hmm need to do something like that in Dubai. Oh! wait, don't need cardboard cut outs there, some neighborhoods have real live ones :)

trailingspouse said...

I'm not a big fan of rent controls as I saw what damage they did in my hometown of Toronto . . . buildings falling into disrepair because landlords weren't getting adequate returns, no new rental buildings being built, etc. However Dubai is a somewhat unique situation because the vast majority of people are renters, rent increases have been so dramatic for several years now and this has/is contributing significantly to a major inflation problem in all sectors of the economy. I think there's a good case to be made for extending rent controls (at some level) at least for another year, until more units come on the market.

What do make of Mr Al Kindi's comment?

"Even though the 15 per cent cap is in place, in reality most of the increases are between five and eight per cent. They do not go up to 15 per cent unless people are renting particularly low-priced accommodation.”

Just which planet has this guy been on this past year? I have heard of only one person who didn't get the full 15% and plenty of people whose landlords asked for way more.

marwan said...

It's obvious Mr.Kindi has never had to rent anything in his life. Or live off his medication, by the sound of it.

BD said...

It may be a case that high rental rates push people to buy, whether to save on rental costs for themselves or to rent out to others at a profit. At the same time it pushes others into misery,desperation and could evenutally lead to an exodus, which wouldn't help the property market or any other industry. Enough is enough. 40%, 50%, even doubling of rates does a lot of harm to a lot of people in the short run and hurts everyone in the long run. Rent caps are a good idea as long as they are reviewed on a year-by-year basis, and eliminated once rates begin to ease. In a "livable" free-market government has a responsibility to at times prevent things from getting out of control.

fellow atheist said...

I hope Dubai does not come up with a rent cap, despite me suffering along with just about every other expat of spiralling rent increases.

Abu Dhabi may have a rent cap, but due to the high demand and low supply, you end up with loopholes like "key monty" and whatnot.

Let the market self-correct. I think the government should stop subsidizing everything (including petrol) and let the market go free. This would of course have to be coupled with allowing free movement of people.. otherwise it just won't work.

naamer said...

I don't think that the rent will dip anytime soon. There is more demand and less constructed space and by the time those properties come into market, don't forget that there will be droves of people who have just moved to dubai while we were waiting.

Dubai Property said...

in a downturn like this, I think it will be counter-intuitive to cap rents, it will only drive away investors!

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