UAE rents still going up, higher inflation inevitable

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A recent survey by the Dubai Chamber of Commerce showed that rising rents are the biggest concern for local business, both for their retail or commercial premises and for staff accommodation.

The five per cent rent cap applies only to existing tenancies. So when tenants move then landlords can hike rentals to reflect market conditions.

That is why a survey from local blue-chip property consultant Asteco has Dubai office rents up by 22 per cent between the end of Q1 2007 and Q1 2008.

The selling price for commercial property over the same period jumped by 54 per cent, so you can not say that landlords are being greedy: rental yields are actually falling.

But clearly rents are still going up, across the board. Average office rentals on the Sheikh Zayed Road, which commands the highest rents as the Mayfair of Dubai, are up from $89 per sqft to $110 per sq ft.

There is plenty of anecdotal evidence from property agents that residential property values will rise by 10-20 per cent this year in Dubai. The only good news is that rent rises are slowing a little, and may fall slightly behind as in the commercial sector.

All this can only continue to stoke higher inflation levels in the UAE, and the Central Bank’s hope for lower rental inflation looks almost as unlikely as lower food prices.