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Discuss this article (9 Comments)Rental revolution: a new dawn
by This email address is being protected from spam bots, you need Javascript enabled to view it on Thursday, 23 July 2009
Former British Prime Minister Harold Wilson famously said "a week is a long time in politics". Of course he meant things can change drastically in a short period of time. When you look at Dubai’s property market, a seismic shift has occurred in a spectacularly brief period.
Things were put in perspective this week when I learnt that my landlord is throwing a wine and cheese evening for his tenants (he has many) as a gesture of goodwill. Understandably, tenants may be forgiven for a collective bout of shoulder shrugging when they turn up to the evening, not quite sure what the occasion is marking.
All this was explained when I bumped into my landlord in the supermarket the other day. He told me he had just knocked AED10,000 off one of his one-bedroom properties for a tenant who has been there for two and half years. “It’s the first time someone has ever asked me for a reduction,” he said, sounding surprised.
He shouldn’t be surprised and nor should anyone about to negotiate their rent. Whether you’ve just extended your lease or are about to renew it, one massive plus of the real estate collapse in Dubai has been, and will be, far cheaper rents. This wine and cheese party, odd may it sound, will allow tenants the chance to confront their landlord head on about reductions. Above all, it ushers in a new era of greater communication between landlord and tenant – something that has been lacking in Dubai up until now.
Real estate consultant Landmark Advisory’s monthly rental index (which has all but replaced RERA’s lacklustre attempt to provide a benchmark guide) for July was released on Wednesday and it points to further rent falls as the property market untangles itself from its current mess. A combination of poor demand and increasing supply – as more properties come onto the market due to departing, jobless expatriates – mean the fundamentals are in place for many more months of tumbling rents.
Some only have to think back a few months ago when landlords were more stubborn on the issue, when you might have felt a smattering of nerves when you tentatively raised the subject of rent. Not now. Landlords across Dubai know full well that if you move out, there probably won’t be someone to replace you. In other words, property owners are desperate to renew leases. Landlords’ hands are tied - and they know it.
If you don’t ask, you don’t get – and tenants are in the strongest bargaining positioning they’ve ever been. A week may be a long time in politics, but it could also prove to be a long time here in Dubai – especially if you suddenly find you are lining your landlord’s pockets by a third less.
READERS' COMMENTS
Disclaimer: The views expressed here by our readers are not necessarily shared by ArabianBusiness.com or its employees.
Rents and Real estate
Posted by paul, Dubai, UAE on Wednesday 5 August 2009 at 10:53 UAE time
For sure rents are coming down, real estate has crashed, like most places in the world. In fact Dubai is fortunate that the real estate didnt crash as bad as singapore and Hong Kong in the 1990's. There they dropped 90%. The returns here were amazing and this and this alone lured alot of people investing into real estate with money they were not prepared to lose.
If you were buying in England, Australia or anywhere else you woul not pay the huge numbers up-front for an off-plan property. No forced people to do that, it is a choice. A choice motivated by the returns and good stories. This had nothing to do with the regulations or government. Never invest in real-estate unless you can afford to lose or hang on to th property for 10 plus years.
I have seen Dubai change since my first period of habitance in 1980. Dubai is resilient and its business ties are strong and it is the trading and business's and tourism which will keep Dubai going and growing. The lower rents will attract more companies to Dubai, (probably not real-estate companies) but companies with a focus on the region. No other city in the region can offer the same level of service or life-style.
The rents have dropped, fact of life. My villa in Barsha was rented for 400k last year and now for a mere 200k, granted still alot of money but certainly much lower than previously. There are area's which seem stable after an initial drop but that is mainly due to increased demand (ranches for instance).
my 5cents of thoughts
Posted by paul, Dubai, UAE on Wednesday 5 August 2009 at 10:53 UAE time
For sure rents are coming down, real estate has crashed, like most places in the world. In fact Dubai is fortunate that the real estate didnt crash as bad as singapore and Hong Kong in the 1990's. There they dropped 90%. The returns here were amazing and this and this alone lured alot of people investing into real estate with money they were not prepared to lose.
If you were buying in England, Australia or anywhere else you woul not pay the huge numbers up-front for an off-plan property. No forced people to do that, it is a choice. A choice motivated by the returns and good stories. This had nothing to do with the regulations or government. Never invest in real-estate unless you can afford to lose or hang on to th property for 10 plus years.
I have seen Dubai change since my first period of habitance in 1980. Dubai is resilient and its business ties are strong and it is the trading and business's and tourism which will keep Dubai going and growing. The lower rents will attract more companies to Dubai, (probably not real-estate companies) but companies with a focus on the region. No other city in the region can offer the same level of service or life-style.
The rents have dropped, fact of life. My villa in Barsha was rented for 400k last year and now for a mere 200k, granted still alot of money but certainly much lower than previously. There are area's which seem stable after an initial drop but that is mainly due to increased demand (ranches for instance).
my 5cents of thoughts
Dubai rents NOT coming down.
Posted by John Warrint on Tuesday 28 July 2009 at 01:10 UAE time
Dream on buddy, rents are the same as ever and so are the landlords.
Posted by John Warrint on Tuesday 28 July 2009 at 01:10 UAE time
Dream on buddy, rents are the same as ever and so are the landlords.
quick revival
Posted by Dr Paul Goodwill Ambassador to my Auntie Margaret, Dubai, UAE on Monday 27 July 2009 at 10:45 UAE time
It seems some people from certain third world countries in particular are totally smitten and still cannot believe that Dubai could crash. With high rise towers, drinkable running water and tidy orderly streets, Dubai must seem like a paradise to them.
But I doubt that third world citizens alone can lift the market. For western expats clean streets and drinkable running water are take for granted - for them to return in large numbers, it would need continued improvements in accountability, legal systems, build quality and economic stability.
The 'quick bounce-back' believers seem to be basing their convictions more on faith than a sensible analysis of similar crashes throughout history. Maybe Dubai is different, but they said that before the crash and it still crashed.
As costs reduce, Dubai will once again become more attractive for businesses. But only if businesses can be sure that costs will stay low and not rocket out of reach again. That can only happen if rents and house prices remain low. Sadly for the boomsters, high house prices are incompatible with a long term successful economy and Dubai will need to be careful next time round to ensure that costs are nailed down, as businesses won't hang around next time it all looks to be getting out of hand.
Posted by Dr Paul Goodwill Ambassador to my Auntie Margaret, Dubai, UAE on Monday 27 July 2009 at 10:45 UAE time
It seems some people from certain third world countries in particular are totally smitten and still cannot believe that Dubai could crash. With high rise towers, drinkable running water and tidy orderly streets, Dubai must seem like a paradise to them.
But I doubt that third world citizens alone can lift the market. For western expats clean streets and drinkable running water are take for granted - for them to return in large numbers, it would need continued improvements in accountability, legal systems, build quality and economic stability.
The 'quick bounce-back' believers seem to be basing their convictions more on faith than a sensible analysis of similar crashes throughout history. Maybe Dubai is different, but they said that before the crash and it still crashed.
As costs reduce, Dubai will once again become more attractive for businesses. But only if businesses can be sure that costs will stay low and not rocket out of reach again. That can only happen if rents and house prices remain low. Sadly for the boomsters, high house prices are incompatible with a long term successful economy and Dubai will need to be careful next time round to ensure that costs are nailed down, as businesses won't hang around next time it all looks to be getting out of hand.
Property & Rents
Posted by alex, Dubai on Monday 27 July 2009 at 09:03 UAE time
The UAE is a fascinating country and like every other country in the world (I have lived in a few due to working for a multinational) there are some very good points and some bad.
However one thing that sticks out is the rental and property situation.
1)Where else do you pay 100% of the rent upfront?
2)Where else do you pay upfront for your appartment/villa before it is finished?
3)Where else do you buy a house that will only last (and only built to last at most) 25 years?
4) Rental agents charging % comission to renters. So the agent is going to try really hard to get you that 10000k reduction as it will directly hit him/her in the pocket! (hmmm should agents not charge commission to the landlords for finding a tennent??)
These points need to change before property here recovers. Luckily for the UAE it is starting and to the joy of everybody except landlords and real estate agents.
Then property will recover and hold sustainable values as the UAE is a forward thinking country and as such will adapt and prosper.
Posted by alex, Dubai on Monday 27 July 2009 at 09:03 UAE time
The UAE is a fascinating country and like every other country in the world (I have lived in a few due to working for a multinational) there are some very good points and some bad.
However one thing that sticks out is the rental and property situation.
1)Where else do you pay 100% of the rent upfront?
2)Where else do you pay upfront for your appartment/villa before it is finished?
3)Where else do you buy a house that will only last (and only built to last at most) 25 years?
4) Rental agents charging % comission to renters. So the agent is going to try really hard to get you that 10000k reduction as it will directly hit him/her in the pocket! (hmmm should agents not charge commission to the landlords for finding a tennent??)
These points need to change before property here recovers. Luckily for the UAE it is starting and to the joy of everybody except landlords and real estate agents.
Then property will recover and hold sustainable values as the UAE is a forward thinking country and as such will adapt and prosper.
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