“Rent control, along with laws protecting tenants against eviction, involves partial expropriation of property rights. It limits the owner’s rights to use and to profit from the use of his property.”
That's the foreword to a paper by economists Milton Friedman and George Stigler, written just under 70 years ago. The market they were referring to — the post-war US — may be far removed from 21st century Dubai, but the complaint about the imposition of a rent cap is the same. In a free market, supply and demand should determine the cost of rent, and keeping prices artificially low serves no-one, Arabian Business reported.
Dubai’s cap — which limited rent rises to 7% every year — was introduced in 2007, in a bid to protect tenants as the housing market shot out of control. However, it puts off potential investors who are rightly concerned that the returns on their investment are being kept artificially low. With fewer investors in the market that, in turn, discourages developers from building more houses.