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Property rental price guide for 2009 in Dubai but no rent cap

The official rental price index is for guidance only and it is hoped that it will give property investors a clear idea of what rent they can expect from their investments, the Real Estate Regulatory Authority said.

'This will enhance transparency in the market and help investors have a solid idea of what rent in their investment should be in the coming near future based on statistics,' said RERA chief executive Marwan bin Ghalita.

The index covers all types of properties and will hopefully stop landlords from putting rents too high, he added. But the expected 5% cap on rental increases is not going to be forthcoming because of the economic downturn.

'We don't need a rent cap this year. We need to freeze everything as 2009 is going to be a tough year and we shouldn't interfere with rents too much,' bin Galita said.

While many analysts and industry experts agree that a rent cap is no longer needed, tenants in Dubai are concerned that it will lead to landlords hiking rents.

However, the industry believes that rent caps are not the long-term answer to Dubai's rental rate situation. 'The rent cap in Dubai, as a tool for moderating escalation, has been very effective. But it is not a long-term solution,' said Blair Hagkull, managing director Middle East and North Africa, at Jones Lang LaSalle.

'With significant supply coming on the market over the next two years, this might naturally moderate prices, achieving the objective of equilibrium in the market,' he added.

Abid Junaid, executive director of ETA Star Property Developers, also said a rent cap isn't necessary as it is usually used in times of inflation. 'The cap was only to prevent landlords from raising rents exorbitantly. I think the landlords themselves might voluntarily stop increasing rates,' he explained.

Analysts are predicting a slight dip in rents in the first quarter of the year with rates increasing later in the year as tough market conditions make it harder to buy property instead.