It's all about supply & demand
The Dubai market is undergoing transformation, that much is evident. While the market went through periods of ups and downs over the years, it is clearly on a different trajectory now - one where the market is controlled by the natural free market forces of supply and demand.
“Rent control, along with laws protecting tenants against eviction, involves partial expropriation of property rights. It limits the owner’s rights to use and to profit from the use of his property.” Those were the words of economists Milton Friedman and George Stigler, written nearly 70 years ago. However, the words hold true even today in a free market. Arabian Business reported that Dubai should consider following Abu Dhabi in abolishing the rent cap in the city rather than keeping prices artificially low.
Clearly, developers are paying attention to market forces as there has been increased focus on the middle-class segment when it comes to housing. Dubai's known for its luxury properties and while these developments certainly earn developers far more money, tenants living in the UAE have begun to make their voice heard - they aren't looking for more luxury properties. Instead, many tenants have been looking towards the other, more affordable emirates in the north.
At the same time, developers now also have the opportunity to restart projects that were halted during the recession because there is an increased demand from investors. Recently, the Dubai Land Department announced that it would be reviving 43 stalled projects worth over AED10 billion as part of its Tanmia initiative.
Market Insight is aimed at examining the emirate's dynamic market and forecasting industry trends. With this shifting trend in Dubai's real estate market, it's hard to predict how the sector will adapt. One thing's for sure, developers are now taking a keen interest in setting up more affordable housing to prevent tenants from leaving the emirate. At the same time, there's a possibility that the emirate will look at dropping the rental cap, following suite of Abu Dhabi.