stability

Rent caps set to be maintained at 2009 levels

Dubai-His Highness Shaikh Mohammad Bin Rashid Al Moaktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, has announced that the rent increase caps for 2010 remain at the same rates as 2009.

Endorsed by the Real Estate Regulatory Authority (RERA), the rent cap states the maximum increase in rent landlords can impose each year.
The 2010 figures have been formed following the trends shown in RERA’s latest rental index. It states that increases can only occur if the property is more than 25 per cent below the average index price.

If the rent is 26 per cent to 35 per cent less than the average rent for a similar property, the maximum increase will be equivalent to 5 per cent of the rent value of the year 2009.

Pattern

If the rent is 36 per cent to 45 per cent less than the average rent for a similar property, the maximum increase will be equivalent to 10 per cent of rent value of the year 2009.

If the rent is 46 per cent to 55 per cent less than the average rent for a similar property, the maximum increase will be equivalent to 15 per cent of rent value of the year 2009.

If the rent is less by a percentage that is more than 55 per cent of the average rent rate, a 20 per cent increase is permissible.
‘Positive move’

“I think the decision to keep the rental cap the same as 2009 is good as it keeps the market in the same condition and doesn’t have that much of an impact as of now.” Sudhir Kumar, managing director of Realtors International told Gulf News.

The decree was implemented to curb the sky-rocketing rents and to regulate relations between landlords and tenants.

“It’s a positive move because it shows that regulatory operations are taking charge. However, there should be more enforcement on the individual landlords who are still breaking the values of the caps and are not abiding to the decree. A closer eye should also be kept on the fluctuating prices with the rent cap keeping up to speed.” said Mohanad Al Wadiya, managing director of Harbor Real Estate.

Realty prices projected to stabilise in 2010

Residential real estate prices are likely to stabilise in 2010, with buyers investing for the long term, according to real estate agents.

At the same time rents in Dubai’s commercial sector have stabilised over the past three months. While office rents in the emirate had been falling since late last year, the rentals have stabilised of late, revealed Better Homes data, shared exclusively with Emirates Business.

“Prices across villas and apartments will stabilise in 2010. Moreover, buyers investing in residences in Dubai will enter on a long-term basis, indicating a less speculative interest in the emirate for next year,” said Mohanad Alwadiya, Managing Director, Harbor Real Estate.

Just ahead of the new year, Emirates Business picked 12 residential projects in Dubai that received interest from potential property owners and tenants in the past 12 months.

Some of these projects saw increased sales and rental transactions, while some projects, such as Burj Dubai by Emaar Properties and the Villa Project in Dubailand by Al Mazaya Real Estate, are gathering a lot of interest just ahead of their handover.

Analysts attributed the stabilisation of rents to an improved economic environment, which has led to a slowdown in the restructuring exercises of local companies.

“The pace at which companies were restructuring and consolidating their plans to cut down their staff and give away additional space during the first half of the year have reduced over the past few months keeping the vacancy level of the office space stable to 25 per cent in the region,” said Porush Jhunjhunwala, Manager, Commercial Leasing at Better Homes.

Residential prices to stabilise on long-term buying

Residential real estate prices are likely to stabilise in 2010, with buyers investing for the long term, according to property agents.

“Prices across villas and apartments will stabilise in 2010. Moreover, buyers investing in residences in Dubai will enter on a long-term basis, indicating a less speculative interest in the emirate,” said Mohanad Alwadiya, Managing Director of Harbor Real Estate.

However, challenges to the real estate sector continue to remain. Alwadiya said: “While mortgage financing is easing, it is still limited in availability. Banks are lending but only to people with certain fixed profiles and according to rigid criteria. For example, people working in the real estate sector find it hard to source funding because of the risk associated to their job. Also, infrastructure in many developments needs to keep pace with the progress of the development.”

Vineet Kumar, Head of Sales at Asteco, said: “The buying trend has been towards ready properties, and mortgage finance is available for most projects from leading mortgage providers. Interest rates are in the range of 6.5 per cent to 10 per cent. Occupancy levels in developments handed over are generally in excess of 70 per cent. Locations such as Dubai Marina and Downtown Burj Dubai are being preferred by young families, while larger families have a preference for large villas in locations such as Emirates Hills and Jumeirah Islands.”

Just ahead of the new year, Emirates Business picked 12 residential projects in Dubai that received interest from potential property owners and tenants in the past 12 months. Some of these projects saw increased sales and rental transactions while some projects, such as Burj Dubai by Emaar Properties and the Villa Project in Dubailand by Al Mazaya Real Estate, are gathering a lot of interest just ahead of their handover.

Other major factors noted have been population shifts from other emirates and other developments in Dubai’s Discovery Gardens and International City projects.

“The reason for this is the attractive rental prices within these developments. In fact, recently, large corporates have looked to lease multiple units for their mid-level staff in International City,” said Alwadiya.

“The Motor City development, too, has witnessed an increase in occupancy rates from end-users and tenants seeking affordable and value-for-money residential units. Influx of people from neighbouring emirates, such as Sharjah, Ajman and Abu Dhabi, has further fuelled growth in occupancy rates within the development.”