Bahrain
Kuwait
Oman
Qatar
Saudi Arabia
UAE
Print
Email
Discuss this article (6 Comments)Landlords lose their grip
by This email address is being protected from spam bots, you need Javascript enabled to view it on Tuesday, 11 November 2008
Since the early 1990s, I have hired hundreds of fresh-faced journalists wanting to make the leap from London to Dubai.
The promise of year-round sunshine and tax-free living in an exotic part of the world has been a lure for media graduates for 20 years, and they eagerly sell their skills in an attempt to land a job.
But there is one hurdle that trips up every job interview; one moment when their enthusiasm dips, their game face slips.
It is the moment when I explain that landlords in the UAE could demand an entire year’s rent in advance.
Fear not, I reassure them, the banks are well set up to help you settle in. A salary certificate from a reputable employer such as ITP will have them tripping over themselves to set you up with a car loan, a housing loan, an overdraft and a credit card.
The only problem, I continue, is resisting the temptation to go crazy with borrowing and run up crippling debts.
But I give this advice out of necessity, not choice. It feels wrong to suggest graduates earning perhaps 12,000 dirhams should be forced into taking out a housing loan of 80,000 dirhams just to get a roof over their heads. Surely, the landlords should be more flexible.
Economic conditions today should signal a long-needed shift in power. Property nearing completion at the moment is likely to come onto the market as rentable housing, because there are very few people willing to buy in the current climate.
This will lead to a considerable spike in the availability of villas and, particularly, apartments to rent. This alone will put downward pressure on what are currently obscenely high prices.
And with banks tightening their lending criteria for people looking to borrow money to pay a full year’s rent in advance, there will be fewer tenants able to find the funds to write those cheques.
The solution should be for landlords to accept market practices that are normal in the entire developed world: annual tenancy agreements, but rent paid monthly.
It is hard to think of an argument against this course of events. Landlords look certain to be stuck spending money on empty properties if they don’t offer competitive prices and flexible terms as economic conditions worsen.
The market will not reach this point immediately. I think it will take a few months for conditions to reach what I see as an inevitable state, probably early in the new year.
2009 will witness a profound shift in power away from landlords and towards tenants; a shift that is long overdue.
READERS' COMMENTS
Disclaimer: The views expressed here by our readers are not necessarily shared by ArabianBusiness.com or its employees.
Landlords will get fair value
Posted by DG, Dubai, UAE on Thursday 13 November 2008 at 13:28 UAE time
The environment is actually gearing for a further advantage for landlords as fewer people are going to buy properties. The super rich couldn't care less about renting their places as they use them a few weeks a year and keep them locked for capital preservation and appreciation. Yes - there will be more apartments and a smaller number of villas available for rent , but there will be a queue of people twice as large to rent them. Landlords will get fair value and perhaps not see an environment of obscene escalations. The rents are not however going to slide down unless the economy fails and there are no people in the queue. Dubai remains and will be the most livable city in the Middle East and the queue of people wanting to rent is unlikely to dwindle. It would be wishful thinking to see the rentals go down - the landords are servicing huge loans at obscene rates of interest and the rentals are reflective of the finance outflows. Grab the nice villa or apartment when you get it, especially when the competition bidding for it is low.
Posted by DG, Dubai, UAE on Thursday 13 November 2008 at 13:28 UAE time
The environment is actually gearing for a further advantage for landlords as fewer people are going to buy properties. The super rich couldn't care less about renting their places as they use them a few weeks a year and keep them locked for capital preservation and appreciation. Yes - there will be more apartments and a smaller number of villas available for rent , but there will be a queue of people twice as large to rent them. Landlords will get fair value and perhaps not see an environment of obscene escalations. The rents are not however going to slide down unless the economy fails and there are no people in the queue. Dubai remains and will be the most livable city in the Middle East and the queue of people wanting to rent is unlikely to dwindle. It would be wishful thinking to see the rentals go down - the landords are servicing huge loans at obscene rates of interest and the rentals are reflective of the finance outflows. Grab the nice villa or apartment when you get it, especially when the competition bidding for it is low.
Lot of Land lords have to just think again
Posted by Kroner Derek, Dubai, United Arab Emirates on Wednesday 12 November 2008 at 12:47 UAE time
I work in a reals estate business, I was working in this sector even before the boom and the crash came. I still have the job however, there are few I know in my sector who have already jumped country after loosing jobs and mounting bank and credit card debts. Banks, are going to see a lot of jumpers because none of them are going to pay the money's back. In the real estate jobs are lost in an average of 100 a day UAE wide, and counting. These are the people who were staying in homes in Dubai and even in RAK because they got better home and land for the same money as Dubai and as they were in sales the physical location did not matter. I know few people who own boats and have left the boats are just lying there, I know this because I am seeing this. On the other hand my Landlord who told me to vacate the place because I was asking for retention of the rent came back to me when few days are left for the contract to renew my contract and to my surprise even at a lower price. However, I found a gentleman who gave me a place for much lower price also accepted 4 checks and I had already moved part of my belongings.
What I intent to say is markets, will fall and markets' will rise but there will be always good people who will stay the same and they earn consistently and get good people. The present place I am moving have very good community people and are unlike flash in the pan money makers who came and have gone. Dubai is great it survives all this and allows people to survive too., you just need to be patient.
Posted by Kroner Derek, Dubai, United Arab Emirates on Wednesday 12 November 2008 at 12:47 UAE time
I work in a reals estate business, I was working in this sector even before the boom and the crash came. I still have the job however, there are few I know in my sector who have already jumped country after loosing jobs and mounting bank and credit card debts. Banks, are going to see a lot of jumpers because none of them are going to pay the money's back. In the real estate jobs are lost in an average of 100 a day UAE wide, and counting. These are the people who were staying in homes in Dubai and even in RAK because they got better home and land for the same money as Dubai and as they were in sales the physical location did not matter. I know few people who own boats and have left the boats are just lying there, I know this because I am seeing this. On the other hand my Landlord who told me to vacate the place because I was asking for retention of the rent came back to me when few days are left for the contract to renew my contract and to my surprise even at a lower price. However, I found a gentleman who gave me a place for much lower price also accepted 4 checks and I had already moved part of my belongings.
What I intent to say is markets, will fall and markets' will rise but there will be always good people who will stay the same and they earn consistently and get good people. The present place I am moving have very good community people and are unlike flash in the pan money makers who came and have gone. Dubai is great it survives all this and allows people to survive too., you just need to be patient.
I wouldn't even consider paying yearly up front
Posted by Cutter, Doha, Qatar on Wednesday 12 November 2008 at 11:39 UAE time
I don't understand how 1 year payment up front is the norm in the UAE??? In Qatar most rentals contracts are same as in the west: yearly contract with rent paid monthly.
The few people I do know here that have paid 1 or 2 years up front have been burned by this practice. Agents collected the money, fed the money to another agent, then another agent didn't feed the money to the owner, then the owner 6 months later assigns an evistion notice to the tentants. And the original agent is long gone. Who knows, maybe the owner is in on the scam also..probably is actually.
So here in Qatar, I wouldn't even consider signing anything other than a contract with post dated cheques.
Posted by Cutter, Doha, Qatar on Wednesday 12 November 2008 at 11:39 UAE time
I don't understand how 1 year payment up front is the norm in the UAE??? In Qatar most rentals contracts are same as in the west: yearly contract with rent paid monthly.
The few people I do know here that have paid 1 or 2 years up front have been burned by this practice. Agents collected the money, fed the money to another agent, then another agent didn't feed the money to the owner, then the owner 6 months later assigns an evistion notice to the tentants. And the original agent is long gone. Who knows, maybe the owner is in on the scam also..probably is actually.
So here in Qatar, I wouldn't even consider signing anything other than a contract with post dated cheques.
Rent Advance
Posted by GB, Dubai, UAE on Wednesday 12 November 2008 at 10:09 UAE time
In todays economic climate, with more and more companies opting not to pay for accomodation, the onus has been for tenants to borrow off banks to get the necessary funds for rents.
In light of the decision by a particular bank to refuse loans to those earning under 10,000 Dhs per month it will mean that there will be a huge fiscal crisis for the mainstay of employees in the country - the blue collar workers. How are people whose monthly salary is usually below 5000 Dhs going to get advances from companies who are hit by the current global crisis? It will have a spiral effect, and workers will simply go to other countries to work.
Rents should be paid monthly - it gives the leasee a better chance to budget, eliminates the necessity to go into debt, and is better for all concerned from the leasees viewpoint. Where else in the world do you have to pay 1 year in advance? Maximum 1 month in advance.
The only "losers" here are the property owners, and they never lose. When the same properties that were being rented 10 years ago at 21,000 Dhs per year are currently being rented at 120,000 dhs per year I would say they are very much in front.
It is time for a little realism in view of the current world economic climate
Posted by GB, Dubai, UAE on Wednesday 12 November 2008 at 10:09 UAE time
In todays economic climate, with more and more companies opting not to pay for accomodation, the onus has been for tenants to borrow off banks to get the necessary funds for rents.
In light of the decision by a particular bank to refuse loans to those earning under 10,000 Dhs per month it will mean that there will be a huge fiscal crisis for the mainstay of employees in the country - the blue collar workers. How are people whose monthly salary is usually below 5000 Dhs going to get advances from companies who are hit by the current global crisis? It will have a spiral effect, and workers will simply go to other countries to work.
Rents should be paid monthly - it gives the leasee a better chance to budget, eliminates the necessity to go into debt, and is better for all concerned from the leasees viewpoint. Where else in the world do you have to pay 1 year in advance? Maximum 1 month in advance.
The only "losers" here are the property owners, and they never lose. When the same properties that were being rented 10 years ago at 21,000 Dhs per year are currently being rented at 120,000 dhs per year I would say they are very much in front.
It is time for a little realism in view of the current world economic climate
Mobile
