Dubai rental index already out-of-date

The new rent calculator on the Dubai Real Estate Regulatory Authority website is already out-of-date with one-bedroom apartments in The Greens listed at $24,000 while landlords have been accepting $16,000.

This reflects the sharp economic slump in Dubai this year with redundancies across business sectors now impacting on demand for property. There is also a continuous release of new accommodation on to the market as buildings from the boom are completed.

Falling market

Landlords trying to obtain rentals at the rates suggested by the RERA index are bound to be disappointed because it no longer reflects market rates. This is of course always a problem when collecting data in a rapidly declining market as the information quickly becomes out-of-date.

Indeed, it is ironic that an exercise that is clearly designed to make the market more transparent should actually end up producing further confusion about the true position. RERA officials have publicly stated that a 10-15 per cent rental price correction is expected for 2009 while a real decline of 30-50 per cent is already evident.

This is great news for tenants and estate agents say there is evidence of a migration into the now more affordable areas. For example, former Sharjah commuters have moved into Dubai to avoid their daily journey, and families living in apartments can now afford villas with gardens.

New locations

It is to be expected that people will abandon old buildings for newer properties in more convenient locations, and this pattern suggests that landlords in secondary locations with sub-prime property will be left with the voids, and that property in the newer districts will always be let, albeit at lower rentals.

Over the next two years hundreds of residential towers and villas will be handed over in New Dubai and this phenomenon is bound to be accentuated. Whether rentals have much more room to fall is open to debate.

However, unless business picks up sharply in Dubai the falling demand, and rising supply of property suggests that landlords are going to have a lean time, the reverse of the recent boom period. Tenants who keep their jobs will be the winners this time.