Realtors: It is still at high rates in regions ... and the solution lies in controlling it
High service fees are pushing landlords to stick to high rental values
Walid Al Zarouni: "A big offer in the rental sector, and the owner has to deal with reality."
Muhannad Al-Wadi: "Service fees have a major impact on rental returns for any property."
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Realtors have confirmed that service fees have a significant impact on rental returns for any property, and are linked with rental values in a positive equation, pointing out that the high fees for some real estate developers push the owner to adhere to high rental values, to compensate for the rental return rate.
They considered adherence to high rental values, an unhealthy condition in the rental market, caused by the high fees on the one hand, and the attempt of some landlords to preserve the returns on their real estate investments, stressing that this problem can only be addressed by controlling maintenance and service fees in many areas that are still at high rates.
Direct equation
In detail, the CEO of "Harbor Real Estate Company" and a lecturer at the Dubai Real Estate Institute, Muhannad Al-Wadi, said that service fees significantly affect the rental returns of any property, referring to the high rents, to the unwillingness of the investor or the owner to lose a large part of his return. Investment for the benefit of the lessee.
He explained: "The landlord's failure to waive the reduction in rental values in the old contracts, and the demand for higher values in the new contracts, the president caused these fees that are charged to the tenant, in order to preserve the investment return from the owner."
Al-Wadi pointed out that despite the effects of the emerging Corona virus crisis, which created an imbalance in the rental equation in favor of demand at the expense of supply, a large group of landlords still cling to the option of the high rental value, with the presence of many vacant housing units according to the latest reports interested in the rental sector. .
Al-Wadi affirmed that the service fees, maintenance and rental values in the real estate market are linked in a direct relationship, as the higher the fees, the higher the rental values, and the lower these fees and they become at good rates, the lower the rental values, so that this is in the interest of the real estate sector as a whole, which is organically linked. It cannot be separated from the “investment” and the “rental”, and vice versa.
He pointed out the valley to areas that include service fees that reach very large levels, which reduces the investment return, and affects the rental value of the real estate unit up, citing an area in which service fees are charged at 55 dirhams per square foot, meaning that you pay a total of 55 thousand A dirham for every 1,000 feet, which reduces the investment return for you as a landlord, and pushes you to raise the rental value to levels that harm you and the real estate market.
Unhealthy condition
In turn, the CEO of "W Capital Real Estate Brokerage", Walid Al-Zarouni, said that the high service and maintenance fees by some real estate developers push the owner to adhere to high rental values, to compensate for the rental return rate, most of which goes to the interest of the real estate developer or his representative. From the real estate management company, it ranges between 25 and 40%.
He stressed that this is an unhealthy situation in the rental market, caused by the high fees on the one hand, and the attempt by some landlords to preserve the returns on their real estate investments.
He explained that this problem can only be addressed by controlling maintenance and service fees in many areas that are still at high rates.
Al-Zarouni added, "There is a large offer in the rental sector for all groups, and the owner has to deal with the current reality and bear part of the equation."
The importance of flexibility
For his part, the CEO of FEM Real Estate, Firas Al-Masdi, pointed out that the fees for services ranged between 25 and 40% of the rental return that the owner receives, which is one of the reasons why many landlords do not want to reduce rental values. Despite the circumstances associated with the "Covid-19" pandemic, under the pretext that their investment returns have become weak, due to what they pay for service fees to the real estate developer or his representative from the real estate management company.
He added, "There are some landlords who deal with the market in a flexible manner, and resort to reducing rental values, as an alternative to leaving housing units empty, in conjunction with the compulsory payment of these fees."
The state of the real estate market
Khamis Al-Zeyoudi, chairman of the board of directors of the Al-Rolli Real Estate Company, said: “There are many areas with good real estate rents, despite the investor paying high fees, meaning that the situation of the real estate market imposes itself on rental pricing.”
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