Rent Delinquency Increases Due to the Real Estate Bubble

Real Estate

The rent delinquency rate in Dubai has grown in recent years by around 5.7 percent. This happened in 2018, but it has been happening since 2015. This increase in defaults is due to various causes. Therefore, today we tell you how rent delinquency increases and what measures you can take to minimize it.

Experts estimate that the average debt of tenants who do not pay is higher than 6,000 euros, specifically, 6,186. This figure is the highest in the last 4 years.

For a few years now the rental price has not stopped growing throughout Dubai, especially in large cities such as Madrid, Valencia, and Barcelona.

In these places, it is difficult to rent and much more to buy. The price escalation in the purchase of properties has been happening since the recovery from the crisis.

The good economic situation in Dubai began in approximately 2015. From that moment it was reflected in the increase in the purchase and construction of new construction flats that have not stopped growing for 5 years.

In part, this caused the purchase to be punctured and the corresponding rise in rental prices. Another possible cause of the appearance of this bubble is the appearance of platforms such as Airbnb.

Many owners inflated the prices by putting them as tourists and took advantage of this pull to raise rents.

These two reasons are the main reasons why this anomalous situation of rent increase has occurred, since, by tradition, our country was always owned by owners and not tenants.

Failed Government Attempts to Stop the Bubble

The government has tried to remedy it with different measures and laws, one of which it tried to carry out during 2019.

It was known as the Decree-Law on Rentals that did not come to fruition, largely due to the rejection of the sector. The law was aimed at protecting tenants and shielding certain contracts.

In a way, it tried to regulate the market to avoid defaults.

As a result of the failure of this regulation, the current government proposes another alternative or rental benchmark. It consists of the municipalities setting a reference price for rents to avoid the bubble.

The law has not yet gone ahead, but it may be carried out if sufficient support is added. In this sense, it is an indication of the attempts of the State to control the market knowing that rents are through the roof.

How to protect yourself from unpaid rent if you are an owner?

This increase in prices, in many cases abusive, makes many people not pay. So the owners have to find ways to protect themselves.

One of them is to ask for larger amounts of money in the deposit or a bank guarantee high enough not to lose cash. You can avail Apartments & Flats for Sale in Jumeirah Village Circle for better experience. Contact Zoomproperty and avail this opportunity now. 

And it is that when one is an owner and reads headlines such as rent delinquency increases due to the real estate bubble or the increase in rent payments grows, it is normal to seek solutions and protection.

But there is another more effective way to cover your back against this threat.

We refer to hiring real estate insurance that consists of offering total protection, not only against defaults but also against breakdowns or incidents with tenants.

This type of insurance has been present in the market for several years, curiously, and its contracting has increased correlatively with the non-payment of rents.

It is estimated that the increase in rent payments has motivated up to 160 percent of the contracting of this type of insurance.

What are the places where people don’t pay rent?

Murcia, Navarra, the Canary Islands, and Andalusia stand out from the rest of the world since the debt is higher than the country’s average, soaring by more than 10 percent and consists of about 6,186 euros, about 8 months of rent.

However, at the head of all of them is Madrid whose price in the variation of bad debts in the period 2017-2018 has been 9,767 euros, almost 1,200 euros more than the second that is Barcelona with 8,571 euros.

So if you are an owner, whether in Andalusia or elsewhere, we advise you to consider hiring rental insurance, and if you have questions about how it works, get in touch with us and we will explain how it works.

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