Dubai to introduce property index

Dubai plans to introduce a new index setting a range of appropriate rents for properties across the city, a local newspaper reported on Saturday, to control soaring rental prices that are fuelling inflation.

The Emirates Business daily quoted the Real Estate Regulatory Authority as saying that the new index would come into effect on January 15, setting minimum and maximum rents that landlords can charge for properties in particular developments.

Dubai, the Gulf commercial hub and member of the UAEs, has already set an annual rent cap of 5% for 2008, tighter than last year's 7% cap and the 15% ceiling of 2006.

The caps are aimed at controlling rents that have soared as more expats arrive to live and work in Dubai while real estate developments have been delayed.

UAE Central Bank Governor Sultan Nasser Al-Suweidi has said rents are the main driver of inflation the second-largest Arab economy, which hit a 19-year high of 9.3% last year.

Dubai does not currently have a property index, which means that tenants pay often very different rates for the same types of properties as rents for new arrivals have risen rapidly in recent years.

The index will not just provide a guide to house-hunters concerned that they are being charged over the odds; landlords are obliged to set rents within the stated limits or report to a rental dispute committee, the newspaper said.

EFG-Hermes said earlier this week that the rental cap would have limited impact on curbing inflation because a shortage of housing was the main driver behind rental increases.

In an earlier report, EFG-Hermes predicted that residential property prices would begin to fall in 2009, a year later than initially expected because of a delay in the delivery of construction projects.

Dubai's population, which is more than 85% comprised of foreigners, is growing at an average of 7.9% a year and may rise to 1.9 million by 2010 from 1.4 million now, EFG-Hermes said. (Reuters)