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Dubai property market stabilised by rent cap
The Dubai Government's decision to place a cap on rent increases in order to stabilise the emirate's property market has been praised by industry figures, reports Khaleej Times...
Industry figures have praised the Dubai Government's decision to introduce caps on rent increases, and in so doing bringing "stability to the market and confidence that Dubai will remain a competitively priced place to live and work in the short and medium term", reports Khaleej Times.
The Dubai Government passed its first Rent Cap Law at the beginning of 2006, limiting rent increases to a maximum of 15 per cent. A second Rent Cap Law was later introduced, fixing maximum rent rises to a lower level of 7 per cent. This law applies to all residential and commercial property in Dubai.
At their networking meeting this month, executive director of the Dubai Property Group (DPG), Adel Lootah, said: "The Rent Cap Law will act as a stabilising factor in the booming real estate sector in Dubai and will help both landlords and tenants make longer term decisions."
Most of Dubai's residents are tenants, of either residential or commercial properties, and rents consume a large part of their income. This means that any rent hike in Dubai exerts a massive inflationary pressure on the rest of the economy and wages in particular. Over the last two years many of Dubai's resident have suffered heavy rent increases, leading many to question whether they can still afford to remain in the emirate at all.
Some potential for flexibility
However, Lisa Dale, head of property at law firm Al Tamimi & Company clarified that the current 7 per cent does not apply in all circumstances. She told the DPG meeting, "It is not correct to say that the 7 per cent cap on increases applies to all tenancies since, as is often the way, there are exceptions to the rule. What the law says is that rent shall not be increased by more than 7 per cent for tenancies that are renewed during 2007. But there are circumstances in which no increase at all will be permitted and other circumstances in which increases of perhaps more than 7 per cent maybe permitted."
Dubai's rent committee may allow rent to increase more than 7 per cent in respect of leases of three years or more that are renewable during 2006 or 2007. Dale explained. "In such cases, the Rent Committee will allow an increase in rent to bring it in line with market rates."
Rent controls now the norm throughout United Arab Emirates
With the exception Fujairah, all the other emirates in UAE have also introduced mandatory rent controls:
- Abu Dhabi limits rent increases to 7 per cent for tenancies with a term of three years or less
- Sharjah permits no rent increases during the first three years of a tenancy, then rent increases in line with market values are allowed
- Ras Al Khaimah now caps rent increases at 15 per cent
- Ajman allows rent increases of 20 per cent once every three years
- Umm Al Quwain permits rent increases of 10 per cent per annum but, uniquely, also allows landlord and tenant to make an alternative agreement
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