Rent Caps and Buy to Let Property Investment in Dubai

The Dubai Rent Committee has, for a second year running capped rental rate increases in Dubai and now the debate relating to rent caps and buy to let property investment in Dubai is raging.

On the one hand you have the argument that it is necessary to cap rental rates to ensure Dubai remains an attractive place to live in terms of its economic competitiveness for the longer term; and on the other 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 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 a more attractive prospect because it removes the chance of unexpected and nasty shocks in terms of costs of living increasing dramatically.

In the years immediately prior to the first 15% rental cap, rates were rising by between 40 and even 80% year on year and this just made it impossible for many people to remain living in Dubai – what’s more, it saw the cost of living spiral out of control.  It is a simple fact that Dubai has to stabilise increases in the cost of living if it is to maintain a grip on inflation, and to this end a 7% cap on the rate at which rental prices chargeable can increase in this particular year is seen by many 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 argument is the one that maintains that by capping rental rate increases you 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.

Even with a 7% cap in the amount by which a current rental amount can increase the yields achievable in Dubai are still very attractive indeed - more attractive in fact than London a lot of the time for example.  And what’s more, by restricting rental increases Dubai actually becomes a more attractive place to commit to, to live in and to open a business or work, meaning that the strong tide of inward migration of professional persons that Dubai currently enjoys 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!

Special Reports: Property News for Dubai

Dubai Guide for Property Investors
Property investors in Dubai are attracted by the incredible rental yields and growth potential in the emirate’s property market currently.

Dubai Investment Property Buyer Guide
Buying investment property in Dubai is a straightforward process however there are certain issues an investor should be aware of

Dubai Property Investment Guide
Dubai is set to continue to represent one of the best returning, relatively affordable property investment markets in the world