A quick question about how this rental index is created: Who reports the rental rates? Does a person reporting rental prices have anything to gain/lose on reporting a higher/lower rental than what it actually is?
I get a feeling that it could be in the interest by a landlord to report a higher rental price than it actually is to boost the rental index and subsequently be able to charge more because the rental index is inflated.
Bit of a longshot perhaps, but landlords in Dubai seems to do whatever they can to get hold of more money including stepping over dead bodies. And if this option is open, we can certainly be sure it's being used.
Enlighten me, please.
As I understand it, with only 2 days to study the new decree, anyone who signed a contract in 2008 have the rent frozen unless the rental value was 25% less than the "average" rent for the area as per the RERA guide.
There is then a sliding scale of allowable rent increases for 26% and over...
See the following for more details..
http://www.business24-7.ae/Articles/2009/1/Pages/01212009_295c9ceef41f423d99c70464898637e8.aspx However, as always with Dubai, nothing is clear in order to leave room for change, i.e. the 25% limit is to cover for the over inflated prices in 2008. added to that is the fact that there is a Dhs.100 fee to register the contract with the RERA for it to added to the average rent for the area.
This RERA lists is loaded to the high side as it's taken from the peak H2 2008 and all landlords have registered their highest prices and the poorest tenants will not want to pay the 100 fee to register their lower rents. That is how come the rents for IC rank less then rents for Karama were most buildings are more than 10 years old with window A/C, brown water coming from the taps, no facilities or parking and zero maintenance from the landlords.
Note to all landlords: see all the 10 year old buildings have rusting water coming from the taps.. what will you do in 10 years from now???
See details of the discrepancies here..
http://www.business24-7.ae/Articles/2009/1/Pages/01222009_d07652d5fa40471c9433e6cd50da2bdc.aspx Give it a couple of years and this system could work to relieve the rent cap, but I think it's 2 years late and in this current climate rents will be on the downward path and continue down until housing becomes affordable to the masses. Remember the average salary in Dubai is only about Dhs.5000/- per month with many people on much less, there is no way for them to afford the rents advertised in new Dubai!, that was only for the new comers and they are not coming now so guess what is next.
Rent should never be more than 25% of income, even if that income is tax free, when rent in New Dubai is at +200% of average income, you have got to wonder... how the hell did we get to this stage? how can one family own their own place with those numbers?? The banks already understand that the figures just don't add up and are not lending any more for real estate.
This new law is meant to help the investors and landlords, but it just wont work, it can't - the salaries are not there on mass to support the required rents, the residence will stack/share 2, 3, 4, 5, 6, 8 to a single room before they pay those rents so you'd better take what ever is on offer now because the only way from here is down for at least 2 years.
Good luck out there people.
