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.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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