Now I have home advantage in the Dubai rents game
I'm looking forward to the next three months. I am just about to enter the final quarter of the lease on my apartment in Dubai Marina and the renegotiation phase begins now.
For once, I think I'm going to enjoy it.
It will be the fifth time I've entered lease negotiations as a tenant in the emirate and on each previous occasion I've hated the feeling of extreme vulnerability. The first three times, with the property boom in full swing, were the worst.
I felt a bit like that hapless Brazilian defender Maicon, who played for Inter Milan in the football game against my team, Tottenham, the other night. The poor chap was beaten so many times by Tottenham's star winger, Gareth Bale, that, in the end, it was embarrassing.
That's how it was for me, too, in my talks with landlords. I, and they, knew that all they had to do was raise the pace, slide the ball past me with a demand for a rent increase and I'd be well and truly beaten again, left grovelling and committed to a new and exorbitant lease for the next 12 months.
Last year, with rents across the emirate beginning to slide, I thought I might be able to get one over my landlord for once. But he just hit me with a burst of pace in the final stages and I was left potentially suckered again.
I called his bluff, however, and refused to sign. I had to move, of course, swapping my cosy little Umm Suqqeim villa for an apartment in the Marina - and moving was a traumatic experience. But at least I'd broken the spiral of rent increases and was able to watch with satisfaction as my old villa stayed empty for four months after my departure.
The landlord had already lost more than all the increase he had asked me for in those four months and I'm sure that in the end he had to lower the rent. It was a small but gratifying victory for the tenants.
This time, the force is with me in the game against the landlords. The reason I'm so confident is a recent report from the real estate advisory firm Landmark Properties, which appears to confirm the trend this year in the Dubai property market: prices (both rental and sales) are plummeting as new residential units come on the market, especially in some of the most desirable parts of the city, such as the Marina.
These are developments that were virtually complete when the credit crisis hit. Final handover was delayed by the financial storm, but now, with some stability returning to the Dubai economy, landlords and developers cannot wait any longer: they have to get the units on the market to cover their development and purchase costs.
The result is a large supply of new property. From where I am sitting writing this column - the 44th floor of an apartment block at the northern end of the Marina - I can see at least 10 new towers in Jumeirah Lakes, the huge development just the other side of Sheikh Zayed Road; there are more dotted around the Marina itself and more still on the Media City side of the Marina and in Al Barsha near the Mall of the Emirates.
According to Landmark, landlords in these new developments are "severely undercutting" market rates to entice occupants into their property. This has led to rental declines of 38 per cent this year in some developments in the emirate, Landmark says.
Even in the more desirable locations, such as the Marina, landlords are offering 20 to 30 per cent reductions for first-time tenants. For them, there is nothing worse than a completed but empty apartment block. Landlords want tenants and are dramatically reducing their income expectations to get them.
The decline reflects the overall slowdown in Dubai property since the peak in the summer of 2008. Morgan Stanley, the US investment bank, said property prices would decline by as much as 80 per cent from their peak before recovery sets in; and just a few days ago, the Saudi Arabian businessman Prince Alwaleed bin Talal bin Abdulaziz Al Saud told a Dubai website property in the emirate would continue to fall as new supply came on stream. All that sounds pretty conclusive.
Some of my friends have already benefited. A family from the same apartment block, who had been paying Dhs150,000 (US$40,841) a year for a three-bedroom apartment, moved to a new block just 100 metres away and into a bigger place at Dh110,000.
And there has already been a knock-on effect in the market for villas; another friend recently swapped his Dh200,000 villa in Jumeirah for a similar one just a stone's throw away at Dh140,000.
With those kinds of precedents, I'm surely on a winner. All I've got to say to landlords and agents over the next three months is this: come on, make my day.
This article was modified on November 7 2010. The original piece stated that JP Morgan called the top of the Dubai property; in fact it was Morgan Stanley which did this.
Published: November 6, 2010 04:00 AM