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Discuss this article (3 Comments)Poll finds over 46% against RERA house price index
by This email address is being protected from spam bots, you need Javascript enabled to view it on Tuesday, 13 October 2009
HOUSE PRICE: Only 4 percent of people say the Rera index will benefit buyers. (Getty Images)
More than 46 percent of people do not support plans for a house price index for the Dubai property market saying it will keep prices artificially high, according to an Arabian Business poll.
A total of 46.9 percent of respondents to the online poll said they thought the index by the Real Estate Regulatory Authority (RERA), planned for next year, would keep house prices at an inflated level.
Only 4 percent of people polled said the index would benefit buyers by bringing a consistency to the city’s real estate market.
RERA announced last week that it planned to introduce a house price index, similar to its rental index, in early 2010.
The index will cover all property developments in the emirate and will help to benchmark property values, Mahmoud Hesham Al Burai, director of development at RERA said at the time.
He added that the co-operation of all 420 developers and 8,000 brokers registered with the real estate watchdog would be central to the index’s success.
The AB poll found that 12.6 percent of people thought the index was a good idea “to some degree”, but that buyers would lose out on cheaper house prices, with extra charges added on by brokers to recoup their losses.
While 36.6 percent of people said the index would not make any difference because the emirate’s real estate market was stagnant after seeing huge losses since the start of the year when the global financial crisis hit.
READERS' COMMENTS
Disclaimer: The views expressed here by our readers are not necessarily shared by ArabianBusiness.com or its employees.
Free, unbiased Dubai real estate report
Posted by Alan Alson on Wednesday 14 October 2009 at 10:03 UAE time
Potatoes, well said. for the long term benefit of all the stakeholders involved, more quality information and transparency is needed. Instead of putting on rose tinted glasses, a good, old fashioned dose of reality is required.
Something that might interest everyone here: Go to AllAgents.me and register for a free weekly Dubai real estate report. This report is being compiled by unbiased private individuals who are not working for any real estate related entity.
Posted by Alan Alson on Wednesday 14 October 2009 at 10:03 UAE time
Potatoes, well said. for the long term benefit of all the stakeholders involved, more quality information and transparency is needed. Instead of putting on rose tinted glasses, a good, old fashioned dose of reality is required.
Something that might interest everyone here: Go to AllAgents.me and register for a free weekly Dubai real estate report. This report is being compiled by unbiased private individuals who are not working for any real estate related entity.
RERA Commercial Rent Index
Posted by Catherine, Dubai, United Arab Emirates on Wednesday 14 October 2009 at 07:04 UAE time
I talk based on a personal experience with the RERA index and hopefully the awareness of this fact will encourage RERA to really address the issue.
Because of the rental index posted at RERA's website, the landlord of an old building where our office is located took advantage of increasing the rent according to the index. I told the property manager that it is quite ridiculous at this time to even increase the rent at a high level when in fact all rents are going down and business is at a standstill.
I also complained that the rent index cannot apply generally to all buildings as they are of different make. It is quite unbelievable that an old building costs the same rent with a new building per square foot.
I contacted RERA and I was told to contact another number which unfortunately doesn't get answered. Because I was running out of time, I told the landlord that we really could not afford to pay the office rent increase and if he didn't give us a rent to an affordable increase, we might as well close our business. I told them that if ever there was a worse time to increase the rent, it is during this time.
I was being sincere and honest when I said that I would honour my commitment to pay a reasonably increased rent even if we have to work three times harder in order to pay up. Integrity is the most important value small entrepreneurs have. But why did RERA have to do this during a recession?
Eventually, the property manager relented. They gave us a discount not reflected in the contract because next year's increase will then again apply on the increased rent. They just gave us a receipt stating that our payment is considered as full payment of the tenancy contract amount.
Wouldn't RERA be more reasonable? Don't they consider the effect of the price index to small entrepreneurs who make a bigger part of the business community? Will it not be better to remove the price index while we are still recovering or in fact barely keeping up with daily survival? Are people like us not represented in their organization and because of that they don't see our point of view?
Posted by Catherine, Dubai, United Arab Emirates on Wednesday 14 October 2009 at 07:04 UAE time
I talk based on a personal experience with the RERA index and hopefully the awareness of this fact will encourage RERA to really address the issue.
Because of the rental index posted at RERA's website, the landlord of an old building where our office is located took advantage of increasing the rent according to the index. I told the property manager that it is quite ridiculous at this time to even increase the rent at a high level when in fact all rents are going down and business is at a standstill.
I also complained that the rent index cannot apply generally to all buildings as they are of different make. It is quite unbelievable that an old building costs the same rent with a new building per square foot.
I contacted RERA and I was told to contact another number which unfortunately doesn't get answered. Because I was running out of time, I told the landlord that we really could not afford to pay the office rent increase and if he didn't give us a rent to an affordable increase, we might as well close our business. I told them that if ever there was a worse time to increase the rent, it is during this time.
I was being sincere and honest when I said that I would honour my commitment to pay a reasonably increased rent even if we have to work three times harder in order to pay up. Integrity is the most important value small entrepreneurs have. But why did RERA have to do this during a recession?
Eventually, the property manager relented. They gave us a discount not reflected in the contract because next year's increase will then again apply on the increased rent. They just gave us a receipt stating that our payment is considered as full payment of the tenancy contract amount.
Wouldn't RERA be more reasonable? Don't they consider the effect of the price index to small entrepreneurs who make a bigger part of the business community? Will it not be better to remove the price index while we are still recovering or in fact barely keeping up with daily survival? Are people like us not represented in their organization and because of that they don't see our point of view?
potatoes
Posted by Danno, Dubai, Dubai on Tuesday 13 October 2009 at 12:08 UAE time
This is quite similar to fixed pricing or when an external party, usually a government, has set a price level which cannot be changed by an individual seller.
Besides the huge blunder of deviating from a free-market economy, the problems resulting from price fixing are numerous, obvious, and sadly help to create an anti-business friendly environment.
Many developing governments around the world experimented with price fixing for farm products. a farmer had to sell his tomatoes according to the governments periodically posted price. the results were disastrous. in some cases farmers had no incentives to use their resources to even pick the produce since it was not cost effective.
The most obvious downside is of course lack of flexibility of the seller. Even though the index is just guideline, the psychological implications in terms of how much you are willing to discount the price are enormous, (i.e. If 100 units are listed for a mill DH each, then why on earth would you try to sell for much lower?) A result could be something similar to a stalemate, sellers refusing to go below the index and buyers refusing to pay that level (we already witnessing something similar now)
levels will be set by RERA people who are landlords, builders, developers, and investors themselves. they will likely price areas to their advantages. if the sellers can achieve those prices, then great. but the reality is you need buyers.
With this sort of system, you are basically prolonging the recovery. We need to cleanse the system. let it hit its natural bottom. it may not be all that bad. once that happens, then the market through simple economics will properly price the various areas around town.
This is similar to the US government printing money, and not letting certain companies collapse, again postponing the pain. but guess what, that pain only accumulates.
Posted by Danno, Dubai, Dubai on Tuesday 13 October 2009 at 12:08 UAE time
This is quite similar to fixed pricing or when an external party, usually a government, has set a price level which cannot be changed by an individual seller.
Besides the huge blunder of deviating from a free-market economy, the problems resulting from price fixing are numerous, obvious, and sadly help to create an anti-business friendly environment.
Many developing governments around the world experimented with price fixing for farm products. a farmer had to sell his tomatoes according to the governments periodically posted price. the results were disastrous. in some cases farmers had no incentives to use their resources to even pick the produce since it was not cost effective.
The most obvious downside is of course lack of flexibility of the seller. Even though the index is just guideline, the psychological implications in terms of how much you are willing to discount the price are enormous, (i.e. If 100 units are listed for a mill DH each, then why on earth would you try to sell for much lower?) A result could be something similar to a stalemate, sellers refusing to go below the index and buyers refusing to pay that level (we already witnessing something similar now)
levels will be set by RERA people who are landlords, builders, developers, and investors themselves. they will likely price areas to their advantages. if the sellers can achieve those prices, then great. but the reality is you need buyers.
With this sort of system, you are basically prolonging the recovery. We need to cleanse the system. let it hit its natural bottom. it may not be all that bad. once that happens, then the market through simple economics will properly price the various areas around town.
This is similar to the US government printing money, and not letting certain companies collapse, again postponing the pain. but guess what, that pain only accumulates.
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