Property in Dubai in the Context of Current Rental Cap

Property in Dubai may continue to be at a high price if the current rent cap continues. In fact, the rising prices will probably continue to affect investors for the next five years or so. The other factor that will feed into this is the shortage of supply as compared to the demand of property in Dubai. Property in Dubai will not come for less unless the rent cap is removed.

According to the statistics available with Dubai Chamber of Commerce and Industry, property in Dubai will witness equilibrium with respect to the supply-demand ratio only by the year 2023. Even then, it will be possible if the emirate’s government does not come up with any new policies for property market in Dubai.

A state of equilibrium means that demand will be equal to supply and thereby property in Dubai will be available at stabilized prices. The simplest way in which this can be done is by increased governmental effort to supply more property units in Dubai market. Important sectors to be enhanced in this regard are the mortgage sector and the property development sector.

According to the afore-mentioned study by Dubai Chamber of Commerce and Industry, property prices in Dubai have gone up by 10 percent in terms of cumulative annual growth rate. The long term rise in this regard has been about 4 percent which means an average increase of 7 percent in property prices in Dubai. The latter in turn is equal to the current rent cap in Dubai property market.

The increasing demand of property in Dubai has been influenced by the following factors with respect to governmental policies:

• Population

• Availability of mortgage

• Cost of mortgage

• Income

On the other hand, the supply of property in Dubai has been and will be influenced by the following factors:

• Cost of production

• Technology of production

• Financing of property units in Dubai