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21 May 2024

Dubai to keep rents in check

By Waheed Abbas

The Government of Dubai will focus on advanced industrial sectors and commercial real estate, while working to keep the rental market within permissible limits, according to a Department of Finance (DoF) report.

Titled 'The Global Financial Crisis – Lessons Learned', the report offers a peek into what the government’s strategy will be in the post-crisis era.

The government will focus on commercial real estate such as hotels, malls and offices in the property market and also work to regulate the rental market to keep it within permissible limits.

Jones Lang LaSalle said in its Q4 2013 report that Dubai's residential, retail, hotel and industrial sectors witnessed strong and relatively broadbased growth.

The property consultancy major said Dubai office stocks will increase from 7.3 million square metre to 8.6 million square metre in 2016 with Business Bay witnessing the most supply. With regard to office rentals, JLL said there was no major change in office rents recorded in the last quarter of 2013. Rents increase marginally in some prime buildings.

Among lessons it learned, the DoF report revealed that in order to boost confidence in the property sector, speculation will be prevented.

JLL said the rapid price growth, return of speculation and the dominance of cash buyers in residential property market could translate into excessive price growth or over development that, if not managed carefully, could result in a bubble.

With regard to keeping rentals in check, His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, issued a decree in December 2013 concerning the percentages of maximum property rent increase that are allowed upon the renewal of tenancy contracts.

Other steps DoF announced include developing fiscal discipline on lending operations, attention to public sector organisation structure and maintaining its size within acceptable boundaries, increasing government revenues, improving operational efficiency of government spending and a review of the development plan and monitoring the economy.

It said the emirate should be prepared for any crisis, particularly when the economy is passing through prolonged periods of prosperity and growth as mistakes are overlooked, accumulated and lead to a crisis. Therefore, caution should be taken and periodic reviews of monetary and fiscal policies should be done.

The Department of Finance also sees further need for higher operational efficiency and focus on investment spending as the emirate benefited from them and expedited UAE’s economic recovery.

(Home page image courtesy Shutterstock)