UAE Property Market Q&A: Rents, Prices and More

**Tim Elliott** (0:00)
Mira Business FM, Morning Drive, Property Now. Mario Volpi is a senior manager at Eva Real Estate these days in his new role, but he's really more of a real estate expert. And he's with me.

**Mario Volpi** (0:13)
Good morning.

**Tim Elliott** (0:14)
Good morning, it's nice to see you. We've been discussing offline a number of things, so it's very strictly real estate now.

**Mario Volpi** (0:21)
Yes.

**Tim Elliott** (0:22)
Where would you, do you know, I'd like to start with the Smart Retail Index. There was a story.

**Mario Volpi** (0:26)
Smart Rental Index.

**Tim Elliott** (0:28)
Smart Rental Index. What did I say? Retail?

**Mario Volpi** (0:30)
Retail, yeah.

**Tim Elliott** (0:30)
Oh, it was almost.

**Mario Volpi** (0:31)
No, it needed to be corrected.

**Tim Elliott** (0:33)
Close, just a couple of letters that went astray there.

**Mario Volpi** (0:37)
Well, one exists and the other one doesn't.

**Tim Elliott** (0:39)
Yeah, exactly. Well, we could start something here.
Oh, this has gone so well so far.

**Mario Volpi** (0:45)
Good morning.

**Tim Elliott** (0:46)
Nice to see you, Mario. So this is a story in the papers yesterday. This was Kelly's Times, and the headline was, Dubai Smart Rental Index Empowers Tenants as the Market Softens.
Two things in that, empowering tenants, good thing. So we'll get into that in a minute, but market softening was the other thing that stood out. So my immediate question for you is, market is softer.

**Mario Volpi** (1:10)
Yeah, well, we always knew that the market inference was going to soften anyway. And I think the sort of confusion or situation that we found ourselves in, in the last sort of 90, 100 days has just accelerated that. So the one thing that struck me from this particular article was the fact that in a rising market, the Smart Rental Index or the rent calculator as it was called before, definitely came into play because tenants would hold it dear to their hearts, purely and simply because it would then limit the number or the amount or the percentage amount that a landlord could raise the rent by at renewal.
But it kind of struck me as being, well, I guess a little bit lame would be the expression, because in a declining market, tenants don't really look at the rental calculator, the Smart Rental Index. At least I don't think they do.
They tend to look at the market and the market prices, which they shouldn't do, because landlords are not allowed to do that in a rising market. So why should tenants be allowed in a declining market? But they do. So that being the case, they can go to the rental index, obviously, and if the rental index says no increase, let's say, at renewal, but if they look online and see a similar property cheaper, they still have that choice, if you like, to then just effectively give notice and then leave. So the rental, the smart rental index, in my opinion, from a renewal point of view in a declining market, whilst it's much, much, much more up to date now than it used to be, because it only used to be updated, well, once it was once a year, then it was kind of quarterly, every half year. They kept changing it, but it wasn't as up to date as it kind of is now. So in theory, it should follow what the market is doing, but it always lags behind. So all I'm saying is that in a declining market, tenants probably tend to look at it less than they would in a rising market, obviously, because then they just can give market forces and say to an owner, look, there is one down the corridor that's on an X, and if you factor in, obviously, removal costs and real estate agents' fees, if after taking those into consideration, it still makes sense. Tenants will just move out unless a landlord will obviously come down. But what I'm finding now, and I'm actually in the mix of this myself, is that there's a bit of an impasse because rents are definitely coming down, and there are, dare I say, less new tenants coming into the fray because of what happened. It remains to be seen exactly what sort of population numbers are. They don't come out that often, but they were definitely on the rise towards the latter part of last year.
So with kind of less people around, you know, tenants are perhaps more in the driving seat than landlords would want them to be. And I'm talking about either new, I'm talking about new and perhaps renewal notices now. So when I'm looking online, I'm seeing prices definitely dropping. And then on, but I also see a lot of these landlords who still have this idea that their property is worth XYZ and are not coming down. And all that's going to do is that their property will either just stay on the market for a much, much longer period, or once they've realized, actually, you know what? There aren't that many people or not as many people. They're not going to get away with it, so they'll have to look at their prices. So yeah, this is a story really more about the fact that rents are on the move. The Smart Rental Index is a massive improvement to what it was a few years ago, because it covers the rating system of the building, it covers the facilities, and whereas before, it was just the average of all the same units, but only from a bedroom perspective, not facilities and amenities as well. So it's much more up to date.