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Thu 22 Nov 2007 05:39 PM

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Rent in Dubai - the full story

The story in Dubai is rent - a place where the cost of putting a roof over your head has tripled in five years, and quadrupled in ten.

Rent in Dubai - the full story

There is no bigger issue in the city right now than rent. In some cases the cost of putting a roof over your head has tripled in five years and quadrupled in ten. Two years ago, the government intervened, introducing a 15 per cent cap on rental rises. Since then they've introduced further laws regulating the property sector and brought the cap down to seven per cent to try and tame the rampant increases hitting tenants across the city. Yet problems persist. Time Out looks back at the last two years, investigates the government's plans for the rental market next year, and tells you where to find the last remaining bargains.

The story so far

It's enough to make you weep; back in 1995 a two-bedroom apartment in Bur Dubai would have set you back Dhs19,000. By 2002 a similar place was Dhs 37,000 - and today you would pay around Dhs125,000. The story is the same in almost every part of the city. The cost of a three-bedroom villa in Rashidiya has rocketed from Dhs40,000 in 2002 to over Dhs120,000 this year, and on Sheikh Zayed Road and in Umm Suqiem prices have doubled since 2002. Salaries simply haven't kept up - at an average of 10 per cent per year, the increases are way behind rental inflation figures. ‘The main driver of price increases is housing costs,' says Standard Chartered economist Mary Nicola. ‘In the past two years it's contributed to nearly 50 per cent of inflation.'

The response to the soaring cost of renting - and just as importantly inflation - was the November 2005 rent cap: 15 per cent would be the maximum increase that a landlord could charge when renewing a tenant's lease.

‘I think that tenants were very optimistic when the rental cap was first introduced,' says Better Homes' head of leasing, Liz O'Connor. ‘However, there are ways to get around it, which has been disappointing for many.'

Nicola agrees. ‘There's no rent cap or price control on new rentals coming on the market,' she says. ‘I'm sure the rent cap has eased inflation to some degree. However, I don't think it eased it to the extent that was necessary.'

With an estimated 200,000 people starting a new life in Dubai every year, developers simply haven't been able to build homes quickly enough. The resulting supply/demand crunch has meant that landlords in the city have been able to virtually name their price. Some unscrupulous landlords have capitalised on the system by sidestepping the cap. Stories include people being evicted at the end of their lease and being replaced with new tenants not eligible for the 15 per cent ceiling. There were reports of people receiving letters informing them that their house is to be demolished, renovated or is needed for the landlord's family - only to see it re-appear on the market shortly after their eviction. And in a Time Out poll, 85 per cent of respondents said their rent had risen above the rent cap since 2005. By the end of this year, the Rent Committee is expected to handle a staggering 8,000 disputes. This compares with 3,896 cases in 2005 and 4,068 cases last year, the first full year of the rent cap in Dubai.

New rules for the new year

‘Another two years, maybe less, and I don't think there will need to be a rent cap anymore,' says Marwan Bin Galita, head of the Real Estate Regulatory Agency (RERA). From January next year the agency will be dedicated to regulating the city's freehold and rental property market. Bin Galita told Time Out that the amount of legislation and number of new apartments and villas due for completion means prices should stabilise in about two years' time.

Until that happens, the agency has also implemented a raft of legislation to control the property market. As of next year, all rental contracts will be standardised, issued by and logged with RERA. This, says Marwan, will not only create greater transparency between tenant and landlord, but also a huge rental database to compare different areas of the city.

‘We will publish the rental market value for each community,' he says. ‘That means before you move to Dubai or move to a different area, you can go and check the value. When we finish our study, you will have a choice: if the landlord is asking Dhs60,000 and the rate online says Dhs50,000, you will know not to take that apartment.'

With standard contracts held by the agency, Bin Galita is confident that the number of disputes and horror stories - arising from landlords trying to evict tenants and bring new ones in to hike the rent above the current seven per cent cap - will drop dramatically.

‘It will create a transparent relationship for the landlord and tenant. It will cover that situation when a landlord turns off the electricity or when a tenant is not paying their rent - because landlords are suffering from this also.

‘If the landlord thinks he has a fair price for the apartment, then he doesn't need to do these things. I think people will not use those tricks or excuses if there is a good, clear system.'

Whether this will create a transparent system remains to be seen, but many believe the only real way to solve the issue of high rents - and with it, runaway inflation - is to build more units. ‘There's too much demand and not enough supply at the moment,' says Bin Galita. ‘But when the gap between the two is smaller, people will be more choosy. My personal opinion is that there is a supply, but the supply is not in the city. There are more than 35,000 units in International City, but because of transportation issues, people do not want to live out there.'

Whether the supply is there and certain areas are simply unappealing, or the market is seriously undersupplied, remains a difference of opinion. UAE home finance firm Tamweel last month said that although more than 50,000 units were expected to be available next year and a further 50,000 in 2009, it will still not be enough. Crucially, there is a distinct lack of affordable housing. Tamweel data reveals 49 per cent of housing demand came from the low-income bracket; but this category of buyer had the option of just 15.4 per cent of new housing developments. Tellingly, for a city awash with cash, the ‘high-end' luxury home market is the area where the supply/demand gap is at its narrowest.In the meantime, what will happen to the rent cap next year? ‘If it doesn't stay the same next year,' adds Marwan, ‘it should definitely go down.' Dubai's tenants will no doubt hope he's right.

The Rent Committee

How it works

‘There are three main reasons given when a tenant is asked to vacate a property,' says Better Homes' Liz O'Connor. ‘The landlord is selling the property, demolishing it or moving into it. Some are genuine and some are not. As far as we're aware the landlord can only ask a tenant to vacate a property if the landlord /owner of the property needs to move into it himself or sell the property. If a family member needs to occupy the property, legally this is not accepted. If the property is being demolished, the tenant can ask to see the demolition certificate and the contract for the reconstruction.'

In all instances where a dispute arises and cannot be resolved, call the Rent Committee on 04 221 5555. Before going to the committee don't forget to take your tenancy agreement, passport copy and any other relevant correspondence.

Graham Small-Shaw, from England, took his case to the Rent Committee last month. Here, he shares his experience with Time Out.

‘I was coming up to the end of my second year, and my lease was up for renewal at the end of October. I got a call from the landlord about two and a half months before, saying he was going to increase the rent from Dhs140,000 to Dhs200,000. I said no - as per the rental law, it's either seven per cent or nothing. About a month later he asked me to reconsider; I said no, and he said, ‘Actually it doesn't matter because my family wants to move in to the place.' I spent a month figuring out what I was going to do. I didn't know much about the Rent Committee, and I wasn't really getting anywhere with the number for the office. In the end I went down to the office in Deira. I spent a while trying to establish whether I stood a chance of winning or not, because it's actually quite a large fee you have to pay. It's 3.5 per cent of the annual rent on the property, which for me was about Dhs5,000 - a lot of money to not get back, along with your place to stay, if you lose the case. You have to pay it up front regardless, if you win you get it back. It kind of put me off at first, but in the end I went for it.

Everything is conducted in Arabic at the Rent Committee, and when the case came up about a month later it was a bit of bedlam.

I didn't know what was going on until I heard my name called. The judges immediately sided with me; I got the result there and then.

There's not really much help for anyone who doesn't speak Arabic when you go through the process. All the paperwork has to be translated. You always hear on radio phone-ins and read in newspapers questions about how to go about it; but there's no policy you can view. They put the onus on the tenant to try and fix things with the landlord, with the Rent Committee being a last resort.

At the end of the day, most people go because the landlord's tried to raise the rent by more than seven per cent or they say they want a family member to move in.

In my experience it was worth it: If you can make the effort and you can afford it, you'll probably win.'

Where should you be renting right now?

When it comes to the rental market, one fact remains: as long as Dubai continues its incredible growth spurt, prices will continue to rise. So with the Real Estate Regulatory Agency keeping the rent cap at seven per cent and maybe lower next year, the question is this: where should you be renting now with an eye to the future? Some places today may seem expensive or incomplete now, but think long-term. In five years' time you could be living in the most desirable district in town, with your rent a fraction of what your neighbours are paying. We asked Landmark Properties for their five picks for the future...

Green Community

Why?

This scenic development may currently seem somewhere between the end of the line and the middle of nowhere, but you've got to keep your eye on the future. By the turn of the decade, this sandy suburb will have a shuttle link to and from Ibn Battuta Metro station, linking the seemingly far away community with the rest of the city. Also, if the

neighbourhood's Marina-esque cafés and restaurants ever get an alcohol licence (the place was once famously home to an Irish pub without beer), you'll have one of the most happening 'burbs in town on your doorstep.

How much?

Prices start at around Dhs150,000 for a two -bed apartment, and Dhs190,000 for a three bedroom villa.

The Greens

Why?

This popular expat community, close to Dubai Media City and Mall of the Emirates, is currently suffering from major roadworks and congestion, but once finished you'll be sitting right at the gateway of ‘new Dubai' and on DMC's doorstep.

How much?

Prices start around Dhs140,000 for a two bed and Dhs180,000 for a three bedroom apartments.

Arabian Ranches

Why?

Another stunning out of town community that is currently hamstrung by road conditions, once Arabian Ranches sorts its link to the Sheikh Zayed Road it will blossom. The Ranches consists entirely of villas - the prized jewel of property - and this along with shops and a school, making it very desirable for families.

If you're thinking even further into the future, you'll have your very own theme park down the road in the shape of Dubailand.

How much?

A two-bedroom villa in Arabian Ranches will set you back roughly Dhs140,000, three-bedroom around Dhs280,000.

Burj Residences

Why?

Properties huddling around the iconic Burj Dubai will boast some of the most exclusive addresses going, and will even have their own mini transport network linking it to the Metro. Like all the other top picks, prices aren't cheap here, especially given the ongoing construction work. But fast forward five years and the cranes will have been replaced by gleaming apartments and villas, and rents will rise faster than the lifts in its record-breaking neighbour.

How much?

A two-bedroom apartment currently goes for Dhs160,000, while Dhs190,000 will get you a three-bedroom place.

Discovery Gardens

Why?

Could Jebel Ali be the new Jumeirah? It's got the beach, it will soon have its own Palm and in Discovery Gardens it has a hotspot in waiting. Located right next door to Ibn Battuta and in striking distance to the Metro and the rest of the city, many apartments are now ready for hand over, but the connecting road network isn't quite there yet. No matter, get yourself a quad bike and prepare to be very smug come 2009.

How much?

Prices are too early to judge, but it's thought they may be one of the last remaining bargains to be had in Dubai.

Rules on sharing

One of the biggest problems when renting in Dubai is when single people want to share a villa or apartment. It can often prove tricky for three males sharing, a nightmare for mixed couples, and virtually impossible for a group of single females to find a place.

‘Before I moved to Dubai, I had no idea I would face such maddening, barefaced discrimination when trying to find a home,' says 25-year-old Briton Lucy Clarkson.

‘In the end, it took me a full six months to find somewhere. That's half a year of reloading and unloading, hopping between hotel rooms and new friends' spare rooms. The big issue was that we were three single women. And being single, certainly when it comes to the rental market in this town, means you're a social pariah.'

There are plenty of single people in this city who cannot afford - or may not even want - to live on their own. Time Out is frequently asked about the situation with sharing; where is it allowed and who can you share with? Sharing is an almost essential part of living in Dubai for many people, so what is RERA doing about it?

‘My personal opinion is that we need regulation,' says Marwan. ‘We cannot stop it, but we cannot leave it like this. If I said sharing an apartment is OK, then there would be people sharing in a local neighbourhood. Bachelors would be staying next to families, which is not OK.'

‘You need to regulate it, put standards in there,' he continues. ‘How many people should there be in this villa? And how should they be bound together in a contract? What area should it be in? If something happens to this premises, is it the guy who's taken the lease, or is it everyone living there's responsibility?

It seems that the situation is unlikely to become clearer any time soon.

The new commuter belt

Let's face it; rental bargains in Dubai are as rare as a traffic-free Sheikh Zayed Road at rush hour. The last bastion in cut-price properties anywhere near Dubai is International City, out on the road to Hatta. Studios there are going for as little as Dhs36,000 per annum, with one bedroom apartments available for Dhs55,000 a year - although they're being snapped up ferociously despite the out-of-town location.

Developments like the Ewan Residences near to the Green Community on Emirates Road were once cheap, but are now rising sharply. You'll pay Dhs90,000 for a one-bed and Dhs105,000 for a two-bedroom, according to agents.

If you can brave the hour and a half drive into the city, the northern emirates are ridiculously cheap by comparison. A three-bedroom villa in Fujairah, for example, will set you back as little as Dhs50,000 a year - about a quarter of Dubai prices.

Sharjah's proximity to Dubai has made it a major target for budget-conscious renters in the past, but that's forced the rent up over the past couple of years. Bargains can still be found, however: a two-bedroom flat in the Al Khan area is currently available for Dhs40,000 a year.

‘In the past seven or eight months we've seen a surge in demand for accommodation in Sharjah,' says Sharjah and northern emirates leasing agent Amal Csrein. ‘There are actually many properties available in Sharjah, but they're lying empty because there's no water or electricity connection to them.'

Just next door, Ajman could well be the ‘new Sharjah' for renters. Prices there are slightly lower and the demand is nowhere near as fierce. Also, says Amal, the majority of buy-to-let homeowners in Ajman often don't live in the country, meaning they're not as committed to getting the maximum returns for their property, unlike their counterparts in Dubai and Sharjah. ‘There are a lot of new projects, really nice places, that will be available over the coming years in Ajman,' says Csrein. ‘The Emirates City development is being built right next to Emirates Road, so it's ideal for transport. It's too early to tell how much they could be rented for, though.'