In an interview with AME Info, Marcus Arbourne, Head of Research, Consultancy and Evaluation at Asteco, talked through the company's report on how Dubai rent increases had slowed down
The report was compiled using Asteco's internal database from their sales and leasing operations in Dubai.
Arbourne says that the average increase still hovers at the 22% mark, although previous annual increases have been higher.
The 'decrease' in rental cost increases he attributes to the effects of the rent cap and Rent Committee being felt on the market.
Whereas tenants would previously have moved from one building to another, many are now realising the financial benefits of staying in their current apartment or villa.
The Kershaw Leonard UAE Cost of Living Report
results would show that this is a sound economic decision.
Double-digit percentage rental increase
Every community in Dubai, and every type of accommodation within these areas, has shown double-digit percentage increases in rental costs.
For newcomers, or those looking to move, the divergence in cost between current pricing and that being paid by sitting tenants is enormous.
Tenancies on studios in the Greens now cost between Dhs85,000 and Dhs90,000, while one bedroom apartments cost from Dhs110,000 to Dhs140,000 - an increase of 25% and 35% respectively on 2007 prices.
The annual price of a four bedroom villa in the Arabian Ranches development now stands between Dhs300,000 and Dhs350,000, while a five bedroom villa can fetch up to Dhs450,000 - a 44% and 34% increase.
Arbourne also notes that landlords are now sticking more closely to the regulations laid down by the Rent Committee, meaning that sitting tenants cannot be evicted without due process simply to charge someone else more.
Though many people are indeed taking the plunge and buying their own property, the majority of these are buying offplan. This means that there is still a waiting period of a number of years before current investors leave the rental circuit.
Increases depend on location
Areas that have shown a marked increase, such as Al Ghusais, where rental costs have gone up 40% in the past 12 months, have done so because they have come from a lower market value to catch up with other communities.
These still remain some way behind areas such as the newly completed Trade Centre Residences on the Sheikh Zayed Road, where three bedroom apartments can be expected to fetch up to Dhs750,000 at the top end.
Similarly the Kershaw Leonard report notes that other new high end areas, such as the Burj Residences have gone up an average of 42% for a two bedroom apartment, and 57% for a three bedroom flat.
A three bedroom villa in the same area will now fetch over 67% more than it would have a year ago.
New units coming on to the market will still see significant growth as developers and landlords will be able to charge market rates without being held back by historical rent caps.
The same goes for new developments in older areas, which serve to raise the price band of all the community's properties. As an example, the cost of renting a four bedroom villa in Mirdif has soared 77% in the past 12 months, driven in part by the Uptown development.See also:Are Dubai's rental price control mechanisms about to change?Watch: Property Talk