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Free Zones Of UAE
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UAE Freezones Biz News Updates
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UAE housing market to go higher in 2014
Rise in sales and investors’ interests set the stage for thriving demand
First of all, I’d like to wish you all a great start to the new year and
hope that you’re enjoying the holidays.
2013 has no doubt been a big year for the UAE property market. Dubai was
recently named the world’s strongest housing market in 2013 given the city’s
status as a safe haven with improved consumer and investor confidence. Home
prices have been recorded at the highest levels since the downturn and the
market has also gained a more favourable reputation for tighter regulation,
given the spate of laws we’ve seen come into effect this year.
So much so that even as 2013 inches to a close, the government has enforced
a new rental decree which allows for rents to be increased by five per cent
if they are 11 per cent below the market rate for the area rather than 26
per cent, as determined by RERA’s rental index. The law will be applicable
to private and public sector owned properties in Dubai, as well as those
within the free zones.
With fears of a lurking rental bubble especially post the Expo 2020 win,
this latest announcement can be seen as yet another initiative by the
government to ensure that the momentum within the real estate sector is
managed well and that landlords do not arbitrarily hike rents on renewals on
any property within the city. This also makes sense given the fact that the
many businesses and professionals expected to come in to the country in the
years leading to the Expo could lead to heightened demand for properties,
causing landlords to demand higher rents.
Reactions to the new rental policy, as expected, have been mixed. Whilst
some residents consider this a better move than the recent total removal of
the rent cap in Abu Dhabi, others worry that a rise in rents too quickly
could drive the market into bubble territory. However, we can also look at
the situation from the viewpoint of the landlord. For one, since 2008/2009,
tenants in Dubai have enjoyed the benefits of relatively lower rents. Hence,
landlords could argue that given the rebounding market, they should be able
to pick up better returns. This may also work in the favour of tenants, as
more landlords content with rental returns in the long run would mean fewer
reasons for them to make a quick buck by evicting tenants. Also, given the
huge influx of investors to Dubai in view of Expo 2020, it makes sense to
realign and adjust the rental index across private and public sector and
free zone owned properties in Dubai.
Amidst all this debate, there are a couple of lessons we need to take away.
Whilst landlords should understand their responsibilities and abide by the
law, tenants should make sure they understand the Dubai Rent Index that
provides average rentals for all key neighbourhoods and use the online
Rental Increase Calculator to know the increase their landlords are eligible
for.
The house price boom that preceded the downturn was so remarkable that to
most people there seemed only one way for prices to go up. 2013 has been a
year of change and growth that many hope will carry into the new year.
Whilst the housing market has indeed made great strides showing a marked
increase in sales and investor interest and setting the stage for thriving
demand with the Expo 2020 win, expecting the price appreciation to continue
with the same fervour next year seems to me once again a self-reinforcing
cycle of popular belief that prices can only go higher. This, of course, is
not realistic and a sign of misplaced optimism, as for the housing market
stable rather than accelerated growth is what will make it robust and keep
the heat out of housing.
Ultimately, supply and demand market dynamics will override other variables.
With market and economic fundamentals remaining strong, there is little
reason at this stage to question that 2014 will also be a strong year for
the real estate market in the UAE.
29 Dec 2013 |
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Courtesy Khaleej Times
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