Third year of caps aims to stop landlords cashing in on high demand and low supply.
Dubai lays out this year's limits for rent rises
The Dubai Government yesterday revealed new rent caps for buildings across the emirate.
The move is designed to restrict landlords from setting rates outside a spectrum based on average rents.
Rents can be raised only if the rates are 25 per cent below the average index price set by the Real Estate Regulatory Agency.
If the rent was 26 per cent to 35 per cent less than the average rent for a similar property, the maximum increase is limited to 5 per cent of the total rent.
If the rent was 36 per cent to 45 per cent less than the average rent for a similar property, the increase is limited to 10 per cent of the total rent.
If the rent was 46 per cent to 55 per cent less than the average rent for a similar property, the maximum increase shall be equivalent to 15 per cent of rent value.
In the final band, the increase will be limited to 20 per cent of the total rent.
The law issued yesterday mirrored a similar decree issued by Dubai for the past four years.
Dubai first introduced rental caps in 2008 after the regulators created the emirate's first rent indexes. Officials said at the time that the caps would help prevent some landlords from taking advantage of low supply and high demand for homes.
Rents increased by 22 per cent from June 2007 to June 2008, according to the consultancy Asteco. The caps are no longer as important now that rents have been steadily declining since the onset of the global financial crisis in the region, which precipitated a sharp downturn in the property sector.
Thousands of properties have also come online since 2008, which has led to natural declines in rents.
Dubai apartment rents declined by 17 per cent last year, according to a report from Asteco last week. In 2009, rents dropped 24 per cent.
The company said Dubai was seeing signs of "stabilisation".
Rents for one-bedroom apartments fell the most, which Asteco said reflected a particular surplus in apartments of that size. Villa rents fell less dramatically.