07 December, 2008

Dubai Rental Prices

Do you have any input/comments/real insight into the Dubai rental market at the moment?

Years ago, it was predicted there would be a form of 'bubble burst' in 2008. Today, some people call it a 'correction'. It's just difficult to believe what people are saying because either it's speculation, or tenants have 'heard something from someone else'.

"Hearing something from someone else" seems to be the norm, though. It adds to the speculative culture. Then, it could be true. Is the real market a combination of both?

RERA, upon formation, announced it would compile rental prices for specific areas around Dubai, which would, in effect, control market rates. Now, a one-bed flat in Dubai Marina is going for Dhs. 150k p.a. I called one of the better known R.E. agencies, and they verified today's trend is that once a prospective tenant views a flat and likes it, the rent is hiked.

This is a very real issue. Skilled professionals are being made redundant, and housing is hard to find. Whether a one-bed in "New Dubai" is Dhs. 100k or 150k, it's still not on par with the majority's salaries. Think about exchange rates, company allowances, and the prevalent "one cheque upfront" system. In the last week, nearly every individual I've met in a social setting has expressed they are looking for a job.

Will Dubai's rental prices be affected given the current crisis, or will the economic model sustain momentum despite the global downturn?

17 comments:

The Wizard of D said...

I am no expert on RE but here are a few of my observations.

The current 'correction' in prices is more due to sentiment than fundamentals.

This is good for the RE market in Dubai. A bit of a shake out will clean the market of speculators.

The rentals are unlikely to come down unless there is any change in the demand/supply scenario

The rentals may correct as some of the new developments get delivered next year

Smith said...

Between the new "visionary" policies that are coming out and the global economy Dubai & it's residents are in serious trouble.

Rents will fall, they have to, they are at unsustainably high levels. Companies who are laying off staff aren't replacing them because the cost of living is prohibitively high and companies that were considering coming here are avoiding Dubai for the same reason.

When you tax and squeeze the people who develop and maintain your society to the point where there is no viability they leave or don't come in the first place.

Now I don't blame the landlords for trying to get as much as they can while there is the chance of making some money, but they are just adding to the problems that the country is facing at the moment and they will be hit very hard shortly anyway.

The level of mortgage defaults is already staggering and the ride is just starting . . .

Anonymous said...

The bubble has burst it seems......

Over hyped and over escalulated rental prices are having a reality check.....

a one bed room flat for nearly 1 million
waht a joke......

Kyle said...

Will Dubai's rental prices be affected given the current crisis

i*maginate:

You better believe it, in spite of all the hype & crap belted out by all the know-it-all-wannabe's!

or will the economic model sustain momentum despite the global downturn?

What new economic model?

I'm like, the sooner these people understand the power of the middle-class (specifically residents), the better for them to debunk a totally Titanic-like scenario!

Eid greetings to you, if you're celebrating, per se!

i*maginate said...

Hi guys, I don't have anything to add...everybody is saying different things, I still think it's impossible to predict if/when rents will 'stabilise'.

Yes, ppl are being laid off but they don't seem to want to leave, so demand will remain.

Where there is demand, there is little supply...this keeps rents high.

Does anybody know if RERA has produced this market rate report yet? It should aid in stabilising rents...

i*maginate said...

kyle: " know-it-all-wannabe's" lool... know-it-all plus wannabe all in one term: genius lol!

Thanks for the Eid greetings ;-)

rosh said...

meanwhile, a villa in SHJ had it's rent doubled from 65k, to 130k..hmmm...

Kyle said...

kyle: " know-it-all-wannabe's" lool... know-it-all plus wannabe all in one term: genius lol!

i*maginate:

That all you can say back to me, that too from a trivial angle? Ah, I was expecting the opening up of floodgates of debunk theories to my comment.

Alrighty, I'll throw-in a tightener that should also serve as an eye-opener to all the excesses in place in this region.

Have you seen George Clooney's geo-political energy-influenced thriller; Syriana? If you haven't, here's a hard hitter (wake-up call) courtesy of Bryan Woodman aka Matt Damon. Focus on the 4th dot. Fictional depiction it may be but everything that Bryan says serves moreso (non-fictionally) as an eye-opener TWIMC.

P.S.: I feel like this exchange should have taken place over at John's (Façade ?) label but here's more an intellectually-inspiring crowd, or at least I hope there is!

Bill, The Springs said...

It is inevitable that rentals will fall.

The majority of Western expats being laid off are those who worked in the industries that were previously most likely to provide a very large housing allowance in a single cheque.

This means that of the expats who are left, the proportion who get an all-in salary and hence have to pay their rent out of their own pockets has suddenly become much larger. Many of these people depend on bank loans in order to pay their rent a year in advance, and those loans are now becoming harder to obtain.

Put simply, there are now far fewer people who are in a position to pay the ridiculous rents that are - or were - being demanded. Landlords can still ask for whatever stupid rent they like, but they are now far less likely to get it.

It's also worth bearing in mind that the companies that previously handed out huge rent cheques are now being forced to cut costs wherever they can, and rent payments for staff are notorious for their severe impact on company cashflow. Some companies have already capped their housing allowances, others are actively revising them downwards.

The brutal truth is that most of the expats living in villas and sending their kids to school here can only afford to do so because their company is directly paying the rent and the school fees. If the breadwinner is made redundant, then no matter how much the family may wish to stay, they simply cannot afford to live here without a company paying all the biggest bills for them - and the number of companies willing to pay those bills in full is rapidly shrinking.

i*maginate said...

kyle - I would love to add to your theories, only that there is nothing to add. Is there? If someone else has something novel to add, the floodgates are open...plus, your comment didn't warrant a debate if you get what I mean?

John posts articles off media. Nonetheless, interesting.

i*maginate said...

Bill - you speak what I think the majority is facing. Nicely put. (Thank you for your insight).

Shame though, what people are facing. It's not a good end to a happy story.

Terrified of Nothing said...

I've just been notified by my company that they will not be paying the yearly rent up front any more but are adding it to my monthly salary package. This makes the 1 year up front even less feasible. We've also laid off about 20% of our workforce. I'm going to my landlord now to ask if they'll accept two checks next year. It's going to be really difficult if they don't.

Just as Bill said...

Stay safe out there.

Anonymous said...

Now the speculator is the bad guy. Could Dxb have acheived what it has (till it began to crumble) without the 'now despised' speculator?

-FR

i*maginate said...

Terrified of Nothing - good luck. It's not an easy situation to be in, by any means. The 1/2 cheques system is not good. Your landlord may push for 1 cheque but if people can't afford it, I would assume they would accept. The 1-2cheque system is not feasible but things aren't about to change overnight - that is my take. It's an unpredictable market.

Anonymous said...

Rents has already started coming down. Ppl in dubai have come back to the barganing with land lords and RE now. Secretly even RE agents say lot of people are going and not much coming back. I am in IT working closely with banks, I know its just the begining, Come Jan, Feb & March...many ppl including th highly paid will have to march. The Financial crisis is real. And there is no FUNDMENTALS in UAE Economy. Its just "Make as much you can from expats" policy. 2009 will see the so called rental "demands" plumetting to the lowest in 10 yrs.Good luck the RE who just like any other business man claiming there in the post that It is still doing good..

Anonymous said...

A 25 to 30 percent correction in rentals is expected... see
www.thenational.ae
Dubai home rents may be weakening Sarmad Khan December 18, 2008 8:57pm

i*maginate said...

expatwoman.com dubai forum has some posts reporting rents are indeed coming down. great news lol!

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