Should I continue to rent a property or buy in Dubai? It is the million-dirham question playing on the minds of expatriates in the UAE. Many people arrive in the Emirates thinking they will do a two to three-year stint but before they know it, they start to see the country as home.
Whether you ultimately decide to rent or buy is a personal decision depending on your own circumstances. Here is what the experts think.
If you are only planning to stay in the UAE for a couple of years, you are better off renting. However, if you live here for longer than five years you should at least consider purchasing a property.
“Many people here are only on short-term contracts, so they don’t want to make a long-term investment if they are only here for a couple of years,” says Craig Plumb, Head of Research for the Middle East and North Africa at JLL. “Because of that there is a relatively low percentage of people who have bought.”
Dubai is still an attractive market for investors, offering a yield of around 6-7 per cent, which is far higher than other major global cities.
“If you compare prices to London, Hong Kong and Singapore, Dubai is attractive on three points,” says Garg. “The entry point is far lower, which is the price per square foot, the rental yield is far higher and the tax rate is low.”
There are also other important reasons why it is also attractive to prospective owner-occupiers.
After the crash of 2008, prices started rising in 2012 until about the third quarter of 2014. Since then there has been a slight softening and experts believe that they have now bottomed out, making it a very good time to buy, despite recent interest rate rises
“The rates are still very attractive,” says Garg. “Interest rates may go up for a couple of years and then they go down again. But the impact on the equation will not be such at least unless there was a dramatic rise in interest rates, which we don’t foresee.”
Dubai Property Mortgage, but most expats pay theirs off in eight to ten years, adds Garg. And if you do the sums, a mortgage works out as cheaper in the short-term with lower monthly payments, say experts.
“I always use the example that my property is worth around Dh1.7 million,” says Jo Philips, General Manager for the mortgage division of Holborn Assets.
“If I was to buy the property in Dubai I would need to put down around 33 per cent deposit. However, my monthly rent was about Dh11,250 a month and if I was to take a mortgage out it would be around Dh6,300 over 25 years. Moreover, you are putting the money into the property. You are not putting it into a landlord’s pocket.”