In recent years Dubai tenants have seen increases in rental payments soar each year, as landlords have taken full advantage of the popularity of Dubai as a place to live. Since the rental market has been so competitive, and there have not been sufficient properties on the market to cater to the demands of migrating workers, landlords have been able to take advantage of the situation and year on year charge increased prices, which tenants have had no choice but to pay.  For many workers who have chosen to move to Dubai on short term contracts or for those making a permanent move, the cost of renting a property has started to raise doubts over the financial benefits to living and working in the Emirate.

Last year the government took steps to address the problem and decreed a rent cap, to ensure that landlords were keeping rents within reasonable levels, permitting a maximum annual rise in rental costs of 15%.

In Dubai, the vast majority of residents are tenants, contrary to what you would expect in a location with so many property options, and so many skyscrapers. The same is true in the commercial sector, with the vast majority of office and retail spaces being leased to businesses, rather than purchased.

In order to ensure that the rising rent costs are kept in check Dubai has now seen its second rent cap, reducing annual increases to no more that 7%. This is a vital step to ensure continued stability to the property market, and ensures that Dubai rent prices will stay competitive and Dubai will continue to be a highly attractive to move for work.
 
In order to provide tenants with the opportunity to check whether rental prices are reasonable, the government has also published a guide, with recommended rental prices detailed per square foot.

The 7% rental cap is not applicable across the board and some tenancies are exempt from rises. The new law states that rents cannot be increased by more than 7% on rental contracts that are up for renewal in 2007, but in some instances there will be no possible rent increase allowed, and other situations when increases of over 7% are possible. For example, if a landlord increased the rental price of a property by the full 15% in 2006 they will not be allowed to increase the rent at all in 2007, whereas if a rental contract has been offered at a cut price rate to initially attract businesses, it will be allowed to be brought up to the current market value.

One thing is certain, that the rental caps are good news for tenants living and working in Dubai who will now not be faced with extortionate out of proportion rises in costs. For the purchasers of property seeking to take advantage of the excellent rental prospects, the cap goes some way to ensure that the market remains competitive and that over the short to medium term that the buy to let market will remain stable.

Whilst Dubai is leading the way in the UAE, the other emirates are slowly following suit. However since the rental pressure has been lower in the other emirates, and demand for rental properties not so great it is no surprise that the same measures have not been introduced as quickly.

For property investors looking to obtain the highest rental rates, and higher year on year increases, some of the other emirates provide more scope. Abu Dhabi, is in line with Dubai, however Fujirah has yet to implement any such rent cap, whilst Ras Al Khaimah only has a 15% rental cap in place.