After all the doom and gloom of late 2008 through to the end of 2011, the economy of the United Arab Emirates (UAE) appears to be on the up and up! It is expected to grow by 4% in 2013 and anyone living in Dubai or Abu Dhabi can already see that the boom years seem to be on their way back. Traffic is backed up again, cranes on half-built buildings are back to work, the queues at immigration are long and even off-plan property sales are on the rise.
The net effect of the evident improvement of the economic scene could be a gradual return to the bad old days of 2008 in certain respects such as housing prices. The government has taken a host of measures in an attempt to prevent the property market from over-heating again, including recent discussion about capping the availability of mortgages for Emiratis, expats and speculators.
CB Richard Ellis reported in late-December that rents in Dubai rose by an average of 17% in 2012, and by as much as 25% in the most popular residential areas favoured by more affluent expats – including areas such as the Downtown/Burj Khalifa and Dubai Marina for apartments, and the popular gated communities of Emirates Hills and Arabian Ranches.
Since all tenancy contracts now have to be registered with the Real Estate Regulatory Authority (RERA), there is now independent evidence of the rate of increase. Currently a rent cap applies, so that landlords are not permitted to demand a rent increase unless the current rent is more than 25% below the RERA Rent Index average for the location and type of property. That is not stopping landlords from trying to demand increases or insist that the tenant leaves, if he does not agree to pay. Most tenants are unaware of their rights or recourse.
More worrying is the evident demand for rental properties and the pressure on prospective tenants to close the deal quickly “because the landlord has another offer”. Given the many issues around non-payment of service charges and lack of title deeds in the newer freehold areas, there is a definite requirement for any potential tenant to ensure that all the correct documents are in place, irrespective of the efforts of real estate agents to hasten the payment of the deposit to push the deal through. This is where SIRVA’s relationships with reliable agents play a key role.
Historically, the Abu Dhabi market has been more expensive on average, but with less pressure to close the deal. That is now changing. A decision by the Abu Dhabi government to insist that all employees reside in Abu Dhabi by November of 2013 or lose their rent allowance, means that there is a shift of Dubai residents working in Abu Dhabi to move in that direction. Oppositely, the quality of the newer off-island properties which are generally of excellent facilities means that current Abu Dhabi residents are moving from the older properties on-island to the newer off-island ones. According to Cluttons report issued this month, rents in these popular areas have increased by between 10-25% in the past 6 months. At the same time, rents for older on-island properties have fallen on average by 12% and up to 19% on older buildings on the Corniche – historically a prime location.
All indicators suggest that the rental market is on the rise in both cities and prospective tenants may well face challenges in finding good properties at a reasonable price.
Wondering about the economy's effect on housing elsewhere? Read up on the 2013 U.S. housing market forecast.