Rents slowly soften

However, property analysts note that both landlords and tenants are demanding rental values that are not recommended by Dubai's Real Estate Regulatory Authority (Rera) Rent Index. Real estate regulatory changes, including the UAE-wide mortgage cap and Dubai's doubling of registration fees last year, have contained a market that was in danger of overheating, a recent report has revealed. As predicted by analysts throughout the last year, the real estate sector has certainly entered its cool-down period. Cluttons Spring 2015 Dubai Residential Market Outlook report highlighted a dramatic reduction in transactional activity. It said as more project near completions and new real estate regulations are put into force, the residential market has slowed down. The report added that the 2015 outlook remained "somewhat mute", with villas expected to bear the brunt of price declines. Even the commercial sector has seen a slow-down. Grade A office rents grew by 14% in 2014 but this strong growth has failed to carry through to this year with a widespread stablisation in rents. In the secondary market, rents have been affected by the abundance of stock which continues to trickle through in locations such as Jumeirah Lake Towers and Business Bay. While demand for Grade A space remains diverse and strong, mirroring the growth across the various business segments of the economy, average rents have stabilised. However, property analysts note that both landlords and tenants are demanding rental values that are not recommended by Dubai's Real Estate Regulatory Authority (Rera) Rent Index. "Once we checked our database, we found that almost every tenant [or landlord] was demanding [rates that are not within] the rental floors and ceilings defined by Rera's index for a certain locality," Haider Ali Khan, CEO of property portal Bayut.com and co-founder of Zameen.com, told Gulf News. "We think the rents are being compromised in anticipation of new units that are expected to hit the market soon." With the index still lagging reality, it is likely that landlords and tenants will settle for “off-grid” deals. The real estate market has undergone a drastic change over the past year - in its path towards stability. Faisal Durrani, Cluttons' international research and business development manager, said: "The regulations have been instrumental in reigning in the market and the slow motion impact has been gradually amplified over the past 12 months. The result has been a much more subdued market, with the risk of another rapid correction being carefully managed away."