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13 April 2024

Any hope of respite in housing costs?

By Nic Ridley

Sat here in the opening days of 2009, it seems hard to believe there was once a time when a significant proportion of expats did not pay an uncomfortable amount of their salaries in rent.

Believe it or not, it was only a few years ago when it was possible to be in, say, a senior management position and yet live in something significantly larger than a shoebox.

The explosion in growth of the UAE – like the theoretical Big Bang that heralded the start of the universe – triggered a major and largely unforseen shortage of accommodation.

But that was not the only driver of soaring rents, which have more than doubled in the past two years alone.

There is, of course, the scourge of sub-letting – illegal – and unscrupulous landlords who milk expats and force a situation of "rent inflation", where salaries are hiked to match rising rents, and vice-versa.

Developers have done their best to bring onto the market as many new communities and high-rise apartments as possible, but that, of course, takes time. And in the meantime, rents carried on rising, often at a jaw-dropping, ridiculous rate. But perhaps that unpalatable situation is now coming to an end.

Recent predictions by Abu Dhabi Chamber of Commerce suggest rents in the capital are set to fall by as much as 15 per cent by the middle of this year.

And in Dubai, experts who spoke to Emirates Business said rents would "soften" in the first or second quarter, or at least increase at a slower rate than previously. They attribute this to the high number of new properties coming on to the market, leading to an environment where supply will meet, if not exceed, demand.

Regulators, too, have done their best, most recently completing a "rental index" in Dubai, which will give tenants a realistic idea of the rentable worth of a property. Landlords will – once the index is approval by the Ruler – have to adhere to the index.

Rent is such a contentious issue – often made worse by a culture of paying in one or two cheques – that it has unquestionably led to many expats returning to their home nation, or deciding it was not financially viable to up-sticks and relocate to the UAE in the first place.

Lower rents – or, at least, rents in line with the rest of the world – will go a long way to ensure the stability of the leasing market, and the wider UAE economy, at least until the financial climate makes it easier to apply for mortgages.

Regulators also must do whatever they can to put an end to the unchecked greed of property owners, who see the large numbers of expats as an easy pay-cheque. In the long-term, everyone has the opportunity to benefit from more realistic rents – landlords with fixed and loyal tenants, tenants with the security they need, and the country with a stable and static workforce.

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