Rent spikes could soon meet a tipping point in Dubai

Rent spikes could soon meet a tipping point in DubaiImage Credit: Arshad Ali, Archives,

It is becoming the regular excuse for any price increase... even before a factual cause motivates it.

Prices are going up, rents are going up and reports from think-tanks warn of an ''inevitable correction'' should the cost of living continue to go up. Many landlords and business owners, even those offering health services, are arbitrarily raising rents and the cost of services offered due to ''rise in cost of living'' or ''unstable rents''. Buyers have noticed spikes in prices of non-essential commodities, while diners make do with a ''decrease'' in the quantity of food servings at some restaurants even through they have kept the rates on the menu intact. All are quoting the rent increase as a cause.

As if it is a vicious circle, whom should we start with? The landlords or those who offer services?

In one example, a business owner wrote to a resident who questioned the increased charges at a clinic, ''We are not happy with having to raise our prices, but in order to keep functioning we were left with no choice,'' and claimed ''unstable rents'' as the reason for the rise. The owner expressed a ''hope that rent caps will be re-imposed in the future''.

There was a rental hike cap, but which was displaced by Decree No. 43 of 2013, which created fresh guidelines on optimum rental increases a landlord can demand during lease renewals. The rules apply to both private and public sector owned properties in Dubai, including those within free zones. The decree covers existing leases and not new ones.

The government's initiative was to alleviate fears that rent increases will get out of control at a time the when the city expects to receive many new businesses and professionals ahead of the Expo 2020. It was a timely — and much needed — move.

Yet, rents are up. There is also an unsustainable price growth in the residential market coupled to an increasing pressure on costs across multiple fronts. This has led many market analysts to talk about ''worrying signs of overheating'' that needs to be ''corrected'', according to the report by JLL, a global real estate consultancy. It added that a correction would be needed if the unsustainable rent increase continues.

''The government as well as investors and landlords hold the key to sustain growth of prices,'' said Craig Plumb, regional head of research at JLL.

Top 10 trends

Avoiding another bubble figured prominently among the Top 10 trends for 2014, said another JLL report issued earlier this year.

No doubt, in free market economies like the one in Dubai, demand and supply governs. But at the same time any irregularity to the equation needs to be corrected. It is not in anybody's interest to make Dubai too expensive a place to live in.

When I read about cost pressures and resource constraints, I remember hearing my neighbours recently engage in a loud spat at about 2am. I still wonder if it was because of the rent, because rent gains was the only excuse I keep hearing for everything that went up.

While analysts, research and even the tenants themselves expect rent increases to continue this year, it is hoped the authorities will step in to make sure the increase is monitored, controlled and above all reasonable.

After all, the increase in prices has not been met as yet with upward revisions in income for most residents in the booming city.

Source: Jumana Al Tamimi, Associate Editor,


For Rent


View more properties

For Sale


View more properties