No rent rise seen in 2009 as Rera brings in new index

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RENTS VIEW: Standard Chartered says it is unlikely rents in Dubai will rise in 2009 as Rera announces its new rental index is completed. (Getty Images)

Standard Chartered bank has predicted that rents in Dubai are "unlikely" to rise in 2009 because of the weakness of the labour market.

In a new report published, the bank said "demographic and employment" levels were key to determining rents.

The study comes as Dubai's Real Estate Regulatory Authority (Rera) revealed it had finalised its rental index that it hopes will replace the need for rent caps in the future.

“Rents can still move up in an environment where house prices drop, especially if more people are encouraged to rent rather than buy. Demographics and employment levels will be more important when it comes to determining rents," the Standard Chartered report said.

"Our view is that rents are unlikely to increase in 2009 (making the cap unnecessary) not because of the falling housing prices but because of the reported weakness in the labour market,” the report added.

Rera said that the new rental index was designed to give average rental rates across different zones of Dubai although no prices have so far been revealed.

"The government has already interfered three times to impose rental caps and now there is hope that the rental index will remove this need," Rera said in a statement.

The commercial index gives the average rental rates for properties, based on road conditions, public parking, location, air conditioning, view and age of the building.

Rental prices for residential properties, however, are not clear. Properties are divided into apartments and villas, and are based on the size of the building only and no other criteria.

"This index is for guidance, not regulation," Marwan Bin Ghalita, chief executive of the Real Estate Regulatory Authority (Rera) said in a statement on Thursday.

"This will enhance transparency in the market and help investors to have a solid idea of what rent in their investment should be in the coming near future based on official statistics."

The price range guidance will be for all types of properties and will stop landlords from putting rents too high, Rera said.

In 2008 the cap stood at five percent and was aimed at curbing massive rental rates and spiralling inflation.

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READERS' COMMENTS

"comparing apples and oranges"
Posted by Hans, Dubai, U.A.E. on Wednesday 28 January 2009 at 15:29 UAE time


It would make sense to pay a comparable amount of money for a comparable apartment within the same area.
However, it wouldn't make sense to set up an average rental rate (RERA) for a 1/2/3 bedroom apartment in one area.
It doesn't make sense to charge a comparable amount of money for an older building as we all know that our landlords are not investing in their buildings. It does make sense to have a comparable rent for a comparable apartment but we shouldn't be "comparing apples and oranges".
A rent cap should be in place to protect the people who have been living/working in Dubai for years. Now it seems like these people will become the victim of another law...
Where the initial purpose of RERA was to protect it now seems to be having a totally different impact.

Rent hiking disgrace
Posted by Ronald, Dubai, Dubai on Sunday 18 January 2009 at 10:59 UAE time

Its really disgracing to know that such acts are going on and are accepted in this country. The locals are supporting locals. Its clear indication that they support each other. Its not a matter that these highly paid so called professionals don't know anything about laws & rules. infact they are paid for making these types of rules, where upon the others suffer

LAW NO:13
Posted by mkp, Toronto, Canada on Saturday 17 January 2009 at 05:59 UAE time


Though I am not an investor in the Dubai realestate market I keep abreast of realestate in cerrtain parts of the world.

Your article mentions "A further shake up of the payment plan structure will see investors having to pay a 30 percent lump sum with the remaining 70 percent paid in installments during construction." That's good both for the developer and the end user.

I have the following concerns:

1.What about buyers who have paid 50% in the beginning of 2008 and the developer has not started construction as yet?

2. What about developers who have delayed projects yet demand instalments as scheduled?. A law should be promulgated that the instalment date should also be moved forward in case of delay.

In Canada if a developer delays possession beyond 120 days from the agreed date of possessionthe buyer has a right to demand all his instalments from the developer and cancell the contract. At the same time the instalments are also delayed accordingly, in case the buyer still wants the property.

Those developers who have not started construction should abandon their project and refund the money to the buyers as is the case in Canada during the credit crunch.

Let us see if the developers follow the law to keep 30% and refund the rest of the money or keep 10% and refund the rest of the money. What action the Land Department will take or how will the Land department help the buyer to get his money? This law should also be promulgated.The developer may procastinate to refund the money.

If the buyer is not protected 100% by the authorities concerned I am positive that confidence in the Dubai property market will be lost forever.

Now they come up with an index!!!
Posted by Ibrahim Sadek, Dubai, UAE on Friday 16 January 2009 at 05:36 UAE time


Hats off to the ingenious planners at RERA or whatever or whoever actually thinks in his or her deluded mind that they're "regulating" the market. Isn't it just a bit too late to get the index out and to remove the cap? No one's buying, rent supply is low, demand is high, professionals are escaping europe to come to dubai, which any grade school student would tell you means that everybody is renting these days. So, would it really be a wise move to remove the cap and give landlords free reign to screw tenants over at their discretion? I've tried long and hard to understand the government's logic, or more accurately, illogical ideas and I've come up with one solution. Maybe it's a population control thing?

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