Rents in the UAE are likely to fall as the country’s population flows reverse, a senior economist said on Wednesday.
“We expect rents to cool off as population inflows slow down,” said Philippe Dauba-Pantanacce, of Standard Chartered in a research note.
The bank earlier warned that rising job losses would inevitably force a number of expats to leave the country, with the majority of the UAE labour force made up of foreign nationals.
Dubai ruler Sheikh Mohammed bin Rashid Al Maktoum on Monday issued a decree freezing rents on properties in 2009 for tenants who renewed contracts signed last year.
However, if rents are more than 25 percent below the guideline figure recommended in Dubai’s new rental index, then the freeze does not apply.
This means many expatriates who arrived in the emirate before rampant inflation took hold, face paying substantially more to renew their leases this year.
The formula suggested is believed to be as follows: For rents 26-35 percent below, the increase can be up to five percent.
For rents 36-45 percent below, the increase can be 10 percent, while for rents 46-55 percent below the guideline, an increase of up to 15 percent can be added.
For rents more than 56 percent below the guideline, a maximum increase of 20 percent can be applied. Arabian Business contacted the Real Estate Regulatory Agency for confirmation on the figures but no-one was able to comment.
Dauba-Pantanacce said that there is mounting evidence that rents are more likely to fall than increase irrespective of this new decree.
“The introduction of a rental index is a positive development which can bring more transparency to the market,” he added.
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