We noticed you're blocking ads.

Keep supporting great journalism by turning off your ad blocker.

Questions about why you are seeing this? Contact us

Font Size

- Aa +

Thu 23 Jul 2009 01:33 PM

Font Size

- Aa +

Rental revolution: a new dawn

Landlords are going to extraordinary lengths to keep tenants, writes Alex Delmar-Morgan.

Rental revolution: a new dawn

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.

Arabian Business: why we're going behind a paywall

Ramesh 11 years ago

I have been in dubai in the real estate business and in year 2000 it was a similar situation....studios were offered at the following rates with 12 cheques facilities and in sharjah you got studio for dhs 7000 per annum plus one month rent free.... Baraha Dhs 12000 pa Bur Dxb Dhs 14000 pa Karama Dhs 17000 pa Shk zayed road Dhs 22000 pa sharjah Dhs 7000 pa This recession and depression phase will hopefully break the rent figures of year 2000 if more and more expats leave in the months of august september october and november...2009..... Time will only tell what will happen to the rents...

ShoeFan1 11 years ago

I told my letting agent that by moving to a similar apartment I could save 30,000 dirhams and get the luxury of a swimming pool thrown in, and that I'd be willing to leave in 6 days. He immediately knocked 15,000 dirhams off the year's rent, and drew up a new contract for the remainder of the year on the spot. Unthinkable even 4 months ago! He also commited to a further reduction when the new contract is up in January. If they won't move, maybe you should....Bring back 2000 prices!

The Don 11 years ago

The correction is a very healthy for both tenants and for Dubai. For tenants it means that they can afford living in a decent apartment and not those smaller units offered as one level bigger (studio is one bedroom apt and so on) which have grow like mushroom in Dubai without any consideration to the fact that the city attracted more families than the general perception that it is a city for young and single people. For Dubai it means that this correction is writing off all the rise in rent, and therefore cost of operating and living in Dubai, as a result for the supply/demand gap and speculators. This will help a well developed Dubai to become competitive as it used to be in its entire history and therefore more business. The only concern is when this crises ends and the market picks up again, the landlords will take a revenge of the bad days and raise rents to astronomical levels that will kill the city for good. The issue is really about investment mentality that developed over the past years: you need to recover your investments as fast as you can, this a transit place and people won't stay long. This is key lesson to learn across that real estate is a long term investments and therefore it should be priced on that fact and not as a retailer price a suite.

Raj 11 years ago

Your concern is highly valid It will take Dubai a long time to come back to the levels we saw in mid 2008, if at all. The speculators wont be speculating in dubai anymore as majority have lost so much money and faith in this otherwise awesome country. Clearly the exposure recieved in international media will create a huge entry barrier to invest further here apart from the highly publicised financial crisis - so we can safely say for the next many many years u can only witness a huge correction.

Arun Kumar rasuri 11 years ago

had always thought that Dubai would take the Hong Kong way in the property sector...many Europeans were shiofting their asset/home acquisitions from Spain and France to Dubai. A lot has happened in the last 9 months and the 'Dubai dream' has definetly mellowed down if not burst for some. However, it will take only a little time before the sector sees a revival. Off-plan properties were the biggest culprit then. This segment has been wiped-off clean for sure. A total value of nearly USD 930 billion worth contruction projects are underway in the UAE. Despite the dowturn the UAE is carrying out projects in construction and other sectors. This should be the way to go

alex 11 years ago

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.

Dr Paul Goodwill Ambassador to my Auntie Margaret 11 years ago

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.

John Warrint 11 years ago

Dream on buddy, rents are the same as ever and so are the landlords.

paul 11 years ago

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