x Abu Dhabi, UAEMonday 22 January 2018

Dubai’s rent rises should be gentle

Amid the excitement about rising rents in Dubai, it's worth remembering that the a gently rising property market serves everyone best.

The real estate market in Dubai is heating up. In many respects, this is good news: it shows that the days of the downturn are falling away, and as the real estate market picks up, the rest of the economy of Dubai is also growing.

But rising rents put a strain on the pockets of families and individuals. As The National reported yesterday, some rents have increased by almost 40 per cent in the past year – for new tenants. Sitting tenants are protected. This situation means many landlords could in theory obtain higher rents for their properties, but are prevented from doing so by the law. In Dubai, rents are regulated by the Real Estate Regulatory Authority (Rera), which limits how much prices can be increased.

To circumvent this, landlords have been finding creative – and sometimes illegal – ways to raise the rents, commonly by evicting tenants, raising the rent and bringing in new tenants. But Dubai law specifies only narrow circumstances in which tenants can be evicted (for example, for the owner or his immediate family to live there). That has led to a spike in the number of complaints that have reached Dubai’s rent dispute board.

There are several aspects to this situation and it is important to parse them carefully. Tenants in Dubai have, for the past four years, enjoyed comparatively low rents because of the downturn. As the economy upticks, it is not unfair for landlords seek a better return.

At the same time, for those who live in them, properties are not investments: they are homes and places to raise families. And moving involves a great deal of effort and expense. So it is encouraging that those landlords who do seek excessive increases find themselves in front of the rental dispute body – and that tenants are increasingly aware of their rights. Moreover, landlords should be aware that the law is the law: circumventing the Rera regulations, however tempting, is illegal.

Cautious is needed. Rents need to rise slightly but steadily to reach a balance between supply and demand. Continued steep rises would be cause for concern, as many would be priced out of their communities.

When rents rise sharply, there is often a call for greater official regulation. That is, in our view, unnecessary in this case: Dubai’s rental market is regulated enough. But as the market rises, it is important that landlords understand their responsibilities and respect the law. The rising tide should come in gently.