12 cheque offers signal Dubai rental market shift

Friday, 30 January 2009 7:16 AM

A new era has begun in the Dubai rental property market with a number of landlords offering monthly rent payments as bank lending tightens and the real estate market cools, Arabian Business can reveal.

From being a one-cheque culture just six months ago, the emirate's landlords are starting to offer 12 cheque payment schemes to tenants in a bid to fill accommodation.

With more properties coming onto the market as job losses mount and tenants downsizing amid the global crisis, landlords are increasingly showing more flexibility, keen to secure rental income, it has emerged.

Dubai broker Smith & Ken Real Estate is currently advertising a monthly payment deal for properties on its books in Old Town.

Antony Anderton, sales negotiator at Smith & Ken said: “Landlords are having to be more creative in the current climate.

“Especially with banks not willing to lend, a 12 cheque system is more appealing and it means people don’t have stump up a huge sum of money in advance. This will become more common in Dubai,” he added.

“More landlords are offering this, it’s happening very quickly, people are rapidly moving in this direction,” said Ryan Mahoney, managing director of agent Better Homes.

“Rents are coming down because demand has fallen and supply has risen through [job] layoffs and number of people releasing their units into the market.”

Landmark Properties is also offering 12 cheque deals on Discovery Gardens and the downtown Burj Dubai development.

Better Homes told Arabian Business it too is offering the deal on some its properties.

Rising supply is pushing rents down, which spiralled in the first half of last year before the six-year property boom started to correct.

Lack of bank lending has meant that many residents are unable to get financing to pay for a year’s rent in advance, so landlords are being forced to make payment easier.

Earlier in the month property consultant Asteco said in a report that rental growth slowed in the final quarter of last year.

Average annual rent for studios, and apartments with one, two and three bedrooms in Dubai were 80,000, 123,000, 165,000 and 243,000 dirhams respectively, Asteco reported

Anderton said that although there was growing evidence of landlords relaxing payment plans, they were still offering a discount to tenants who could pay a year’s rent upfront.

“Landlord’s are trying to avoid it as they feel it will change the market. But monthly payments will bring Dubai in line with any other developed property market, such as the UK,” he said.

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Posted by: SR Wednesday, 4 February 2009 9:51 AM[UAE]

Some really amusing stuff coming out on this thread! Actually what is the use of a 10-15% discount if you pay upfront while you can borrow the annual rent from a bank at 8%. "Never buying" has a point, "discount"/ "interest" it compensates for the time value of money - I dont' think there should be any argument on this. We would be a little cynical to say that high rents & property prices are better situation to be than a situation where rents & property prices are coming down, but there are job losses. BEACUSE both these are results of the global credit crunch and correction in the property market. It is foolish to believe that if the rents and property prices are artificially kept at their higher levels; then there will be no / lesser job losses. Actually there may be more job losses in that scenario because much more businesses will go bust due to higher rents!

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Posted by: tricky Wednesday, 4 February 2009 12:54 AM[UAE] - uae

Everyone is so happy that rents are going down everyday...I think with the rate rents are falling you might be able to rent a 4 bedroom villa in the palm or ranches for 150K and maybe a high end 2 br in the marina for 60k...This can easily happen in 6-9 months?But rest assured that by that time you will not be here to rent it out...Wake up guys the rapid decline in rent means diminishing demand due to people getting sacked and companies cutting down!!

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Posted by: Aftershock Wednesday, 4 February 2009 12:24 AM[UAE] - uae

Never buying (cool name by the way!), I think luis gave you a convincing rationale as to why there should be a difference between 1 or 2 cheques and 9-12 cheques. You are comparing the rent to bank deposit rates which has no relation whatsoever. A 10% discount if you pay upfront is very common in any business transaction and in these uncertain times, I?m happy to give 12% to 15% discount. You are thinking of an increase over the rental level while I?m actually talking about a special discount as an incentive to pay in 1 or 2 cheques. Rainigade, the 9 cheque option (don?t know why you picked up on the 6 cheques only) is almost a monthly payment with 2 months advance/deposit, so you basically pay monthly up till the 10th month. On the 11th and 12th you will basically use the advance/deposit paid initially. If it?s only 1 month/advance deposit then it will be a 10 cheque scenario. It can never be 12 cheques as this means that there no advance/deposit to cover the landlord in case you decide to leave. On average, it takes 6 to 8 weeks to rent an apartment so if the tenant decides to leave half way through, then I think it?s only fair that the landlords expenses are covered for 1 or 2 till he finds a new tenant Doug, nice tennis match mate ? enjoying our debate! You are thinking of a monthly rental and I want a yearly contract (even if it?s paid monthly). Bottom line, I don?t want the headache of looking for a tenant ? believe me it?s the same headache you face looking for apartment to rent. We both have better things to do in life?don?t you agree? I think you are being a bit too harsh on Haytham?the guy has a point! Yes real estate has crashed and rental market is going done, but this is not happening in isolation?.the whole economy is in a deep downturn?You are even giving an example of 2 guys getting sacked and how one rental option is better than the other in case of a lay off?A few months ago this would have been a very silly example, but now it?s a reality?What is the point of rents going down if you can?t really enjoy it? you go to work everyday worried that you might get sacked or at least see your friends being laid off and going back home? You know your bonus has been massively and you will hardly get any increments anytime soon?Many people will actually downgrade instead of upgrade and try to save a bit more!! It seems that all tenants on this forum have suffered from horrible landlords, I just advice you to look around and you will find decent people out there.

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Posted by: Doug Tuesday, 3 February 2009 3:28 PM[UAE]

Um, Hytham, what planet are you on? How is it better for one person to pay everything upfront rather than monthly? Think about it. If you have to pay everything up front and lose your job, you still have to pay for it. If you pay for it monthly, you don't. You can leave, and then the landlord can re-lease the property to someone else. Let's take your example - one person pays 75,000 up front, the other pays 50,000 in 12 cheques. Both lose their jobs 6 months after signing the lease. One-cheque man is now in debt by at least 37,500 Dhs and has no income. 12-cheque man is essentially debt free and can leave if he has to. How on earth is one cheque better for the tenant? As I've said before, landlords really need to get out of the mindset that they're entitled to have a tenant for the whole year.

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Posted by: hytham Tuesday, 3 February 2009 2:01 PM[UAE]

i cannot see why some people are happy. it would have been good if it is only in the real estate market. but the crisis is in all sectors indeed. it is better to pay 75000 but have finance and good salary rather than having to pay 50000 in 12 cheques while you are jobless and will have to go home

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