Friday, September 11, 2009

Dubai Metro likely to command 10 percent hike on rents

The prices of properties adjacent to Dubai Metro stations can command an increase in rent of up to 10 percent, as the mass transit system draws more people off the roads.

People seeking homes, will no-doubt take into consideration the proximity and convenience to public transport, as the city moves away from its dependency on private vehicles.

Rents across Dubai have already seen a marginal rise, but the possible impact of Metro is still speculative, say industry analysts.

Any increase in rental could be further tempered by the RERA (Real Estate Regulatory Agency) watchdog, which at present does not factor Metro stations in its rental price index.

The Director of Research and Advisory Services at Landmark, said that the impact on prices has been marginal, so far, due to the uncertainty in the market and anticipated Metro usage patterns at the outset and about how usage patterns evolve over time.

On an average a 5 to 10 percent increase in premium can be expected during the first two years of operation, depending on the residential location and specifics of the development or individual buildings, the Director said.

As for the Metro commuters, the office location will be a critical factor. Few popular localities are getting highly congested with limited parking space. The Metro will be advantageous to residents living or working in such localities.

The actual Metro use and its impact on property prices will also depend on unknown factors such as Salik. For instance, if Salik fares increase, this could trigger more widespread use of Metro and then prices would be adjusted accordingly.

The Metro is likely to have an impact on commercial prices and rentals too. With increase in use of the Metro, offices with easy access to stations will gain a premium.

For instance, most offices in Sheikh Zayed Road have only limited parking spaces, with several companies or employees having to pay for additional parking spaces. When the companies can see how proximity to a Metro station can help save them their employees both money and hassle, preferences will emerge, resulting in premium.

However, RERA keepts tab on rents, and irrespective of the location of the property, the rents have to fall within the range. Properties located close to the Metro may be priced towards the higher end of the range, but will not go beyond a limit.

The landlords in particular, need to be very cautious before increasing rentals, as they would be violating the law set forth by the government. All these factors need to be considered by landlords and industry specialists before any hike in prices before the Metro gets fully functional, the analysts point out.

No comments: