The choice between buying a home and renting one in Dubai is among the hardest financial decisions expatriates would have to make, especially at the moment. As many experts have agreed, the time is right to invest in Dubai properties. But is it right for anyone? Are you better off continuing to rent, or is it time to become a landlord?
propertyfinder.ae examines the differences between renting and buying a property in Dubai, and whether or not you’re in a position to invest.
- Short-term commitment: even though tenants sign a one year contract with the landlord, getting out of a tenancy contract is significantly easier than getting out of a purchase contract.
- Ease of relocation: finally got offered your dream job on the other side of the globe? No problem, just cancel your contract and pack your bags. Renting a house allows tenants to confidently take on new adventures.
- Less short-term expenses: when it comes to the rent vs. buy debate, rent leads the way by being cheaper on the short term (DLD fees, registration fees… etc).
- Inability to fully settle in: let’s face it, when you’re renting a home, no matter how long you plan on living there, you know it’s someone else’s. This could be an obstacle for people wanting to build pools, renovate infrastructure and many other things the landlord would probably not pay for.
- More long-term expenses: simply put, you’re giving away your money in return for a temporary service. If you rent an apartment for three years, paying 95,000AED a year, you would have spent 285,000AED and leave with no tangible value.
- High rental rates: renting in Dubai is becoming more difficult for the low-to-mid income residents. Rent prices went up and are not coming down at a desirable rate.
Things to consider:
- The market: whether or not you’re confident, and financially secure enough, to handle the fluctuating rental rates should be taken into consideration when making the decision to continue renting.
- Planned period of stay: if you are considering to settle in Dubai for longer than 5 years, then renting a property is not the most practical decision.
- Your financial situation: once again, the purpose of your stay in Dubai plays a big role in deciding whether to rent or buy a house. Many expatriates come to Dubai to work for a few years, save money and settle somewhere else. In addition, whether or not you have enough money saved for a down payment (which could go up to 25% of the net price) also plays a role in making the decision to buy.
What did you say?
“Buying a property in Dubai is not for those who plan on moving back home someday. In my case, I can’t make that kind of a commitment, not financially, nor geographically.” – Reema, 36, Lebanon
- Long term investment: land ownership is one of the oldest statuses in human history, and rightly so. Whether you’re buying to live in the property, or to lease it, or even to sell it, a financial gain is guaranteed in one way or another.
- Ability to settle: nothing helps you settle in like knowing that no matter what happens, at the end of the day you own a home.
- Opportunities: unlike renting, buying a property presents you with a number of opportunities which could generate plenty of revenue. Some expatriates in Dubai mainly live off of revenue generated by property leasing.
- A number of recurring costs: Owning a home comes with a surprising variety of expenses that renters do not directly pay. These include maintenance fees, insurance fees, mortgage payments… etc.
- High initial costs: 25% in cash, 4% in DLD charges, and 2% agent fee add up to 31% of the net price which needs to be paid up front.
- Fluctuating market: even though a fluctuating market would not directly affect a homeowner, it could, however, cause some financial losses if the owner is leasing the property or investing it in hospitality.
Things to consider:
- Purpose of purchase: one must seriously consider the reasons driving them to invest. This would not only help make a decision, but would also help choose the appropriate property in the right location.
- Exit strategy: a plan to sell or liquidate the property needs to be set even before buying the unit. This would give you a peace of mind and a safe exit in case you decide to leave the country or pursue other investment opportunities.
- Financial situation: even though there are many advantages to buying a property in Dubai right now, however, you should not be hasty with this decision. Take a good look at your finance, or even consult a mortgage broker to tell you whether you’re able to afford the initial costs of the property.
What did you say?
“I have lived in UAE for 8 years before my wife and I made the decision to buy a house. It was the smartest decision I’ve ever made; the fact that I no longer need to pay rent, and can have a place I call my own.” – Mike, 49, South Africa