Sherwoods expects transparency, affordability to help restore Dubai rent market stability in second half of 2009

Sherwoods expects transparency, affordability to help restore Dubai rent market stability in second half of 2009

Newly introduced rental index drives back investor confidence as financial crunch helps bring rents to more reasonable levels

February 28, 2009
Sherwoods Independent Property Consultants has announced that it has recently deployed new strategic initiatives to capitalise on an expected upswing in real estate business activities within the last two quarters of 2009, as the global financial downturn gives way to more positive changes in Dubai's property rental market. Furthermore, Sherwoods revealed that it expects the rental index introduced recently by the Real Estate Regulatory Authority (RERA) to further consolidate and stabilise the rental market in the long term, as it creates a highly transparent system that promotes investor confidence and helps control rates from once again escalating to unreasonable levels.

With rents becoming more affordable partly as a result of the global financial downturn, Sherwoods pointed out that the situation will ultimately deliver long-term benefits to Dubai's property sector as businesses will feel less pressure in subsidising housing allowances for their workers, while more people will be encouraged to relocate in the emirate. Sherwoods further noted that a more stabilised rental market combined with the adoption of a credible rental index system will likewise drive investor confidence as rental yields will be much more predictable and easier to calculate.

"Two key issues will impact Dubai's rental rates: employment and the supply of property in the market. Further job losses could erode demand, while the supply of inventory into the market needs to be controlled to avoid oversupply issues. However, as affordable accommodation remains a key driver to the Dubai economy, we have seen a positive trend in terms of proactive government intervention and the rent market's resiliency, which we believe will eventually help rents to level off and stabilise during the last two quarters of 2009," said Iseeb Rehman, Managing Director, Sherwoods Independent Property Consultants.

"The sharp acceleration of rents over the last couple of years has put enormous pressure on employers who were subsidising housing allowances, negatively impacting the growth of a number of business establishments. With the emerging trend of more affordable rents, the long-term prospects become a lot more encouraging as it helps encourage both businesses and people to relocate here. Accordingly, Sherwoods has devised new strategies to help clients identify and take advantage of the gainful opportunities that have evolved in this transition period in Dubai's rental market," added Rehman.

Sherwoods also noted that some of the issues raised against the rental index are likely short-term problems, which can be settled once the values reflected on the rental index are updated for 2009, providing a more accurate depiction of the current market situation. Furthermore, as it considers the rental index a more viable long-term solution to resolve issues in Dubai's rental market, Sherwoods expects RERA to update the index figures on a regular basis and subsequently have a more clear-cut policy on the index's role in the rental market.

"To obtain credibility the index has to be updated by RERA on a regular basis to correctly reflect market rents. There also needs to be a clear message from RERA; currently they say the index is only a guide, but if it is to replace the rent cap then it will need to be adhered to as law. The index could prove revolutionary in meeting the needs of both landlords and tenants and if the mechanism is used correctly, it will provide a very transparent system to evaluate rental yields and help control rates escalating again to unaffordable levels," concluded Rehman.

Founded in 1988 in the UK by Iseeb Rehman, Sherwoods has grown to become one of the region's fastest growing real estate companies. Sherwoods has expanded to five branch offices all over the UAE and regional offices in the UK, France, and soon in other key locations around the world. The company offers a diverse range of services, including search and acquisition of properties, offshore company information, selling of properties, mortgage services, valuation and appraisal, legal and tax services, and lettings and management.