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Property in Dubai, The Rent Caps Proposed and More

Jun 21, 2008
The Dubai Rent Committee has once again regulated the rental rate increases in Dubai resulting in the debate relating to rent caps and buy to let property investment in Dubai seriously raging.

There is the argument that it is necessary to cap rental rates to ensure Dubai remains an appealing place to live in terms of its economic effectiveness for the longer term; whilst on the hand you have property industry experts pointing out the fact that "Dubai's economy actually benefits significantly from the property industry and by capping rental rates you're effectively capping the attraction of the nation from an investor's perspective."

Those who are in favour of the latest 7% rent cap say that it "will make Dubai a more stable environment for the majority of people living in the emirate."

"The vast majority of those who have committed to live, work, start a business or invest in Dubai are affected either by home or premises rental rates or perhaps both - when their ongoing rental liabilities are known, these individuals will be able to more effectively forward plan."

This makes living in the emirate even more attractive as it removes the chance of unforeseen, in terms of costs of living increasing dramatically.

It is a fact that Dubai has to stabilise increases in the cost of living in order to maintain a grip on inflation. Accordingly, a 7% cap on the rate at which rental prices chargeable is viewed as not only a good thing, but essential to maintaining the ongoing attraction of Dubai as a place to live and work.

Directly contradicting this viewpoint is the fact that by capping rental rate increases, you inadvertently cap the attraction of Dubai.

In terms of the buy to let investment property market a cap is quite literally a restriction on profit, and because Dubai's economy has been bolstered incredibly significantly since the right of foreigners to own freehold real estate in the emirate became law, the economy could now suffer if fewer investors wish to buy property in Dubai and become landlords.

Whichever side of the fence you're on we feel it's wise to take a step back from the intense argument that's raging for just a moment.

By placing restrictions on rental increases, Dubai is actually ensuring it becomes more attractive as a place to commit to, to live in and to open a business or work from, meaning that the current strong flow of inward migration of professional persons that Dubai is experiencing at present will continue and demand for rental accommodation will also continue to be very strong.

This has the effect that vacancy rates for commercial and residential real estate will remain very low indeed and so an investment property bought in Dubai with the sole purpose of the investor being to let it out for an income remains an attractive investment asset simply because it will almost always be occupied and returning an income!

If rental rates were to continue spiralling upwards, more people would leave the emirate than arrive and buy to let investors would likely find it increasingly difficult to find anyone to pay their ridiculous rental rates!

In order to attract more foreign investors into Dubai, Khalid Ahmed bin Sulayem, the Director General of Dubai Tourism and Commerce Marketing (DTCM) revealed: "We want annual visitor numbers to rise from seven million to ten million by 2010. To achieve that, we are working to implement various new initiatives and strategies."

He further commented that "The next three years will see the most dramatic developments in tourism projects, and Dubai will continue to be a 'frontrunner' in attracting visitors to this part of the world."

This is good news for Dubai as a country and burgeoning economy. Apparent and clear to see is the fact that investing in Dubai - regardless of its rent caps - is still extremely lucrative and a positive venture when one considers the vast amounts of profits to be had in return.
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Dubai Property Select offers a comprehensive selection of overseas Property in Dubai, news, members club and reviews of the latest property developments.
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