To buy or rent in Dubai? This is a common question on everyone’s lips, particularly expats’, moving to the city.
The debate
A very basic answer to this dilemma can be found by asking yourself how long you plan to stay in Dubai, the sort of property you prefer, whether you want to buy Dubai properties as an investment or receive rent to help repay the mortgage. On top of basic costs of renting or buying, there are other factors you will need to consider. Can you afford the deposit and the fees? Would you qualify for a mortgage? Will you wipe out your savings? How about ongoing costs such as maintenance and service charges? Would you be able to cope with negative equity if the price of your property decline?
Summary of buying costs
Buying involves a 25 percent deposit. Fees would add another 10 percent to the equation. That is a lot more than average rent you would be paying.The next question to ask would be, “Do you quality for a mortgage?” Most banks require a minimum monthly salary of 10,000 dirhams besides other criteria such as your age now and at the end of the loan (65 max. for expats), whether or not your employer is listed with the bank,etc.Next, if you are draining your savings to buy a property, you need to ensure that you have sufficient funds left over for property repairs if something goes wrong? Further, would you have something set aside for your emergency fund? What happens if you lose your job?
Then, there are ongoing service costs. While these can be very low in a villa, they can be quite high for an apartment given the cost of servicing indoor and outdoor communal areas, broken elevators and central air conditioning systems. Aside from this, there are maintenance costs if you are the owner of Dubai properties. Your water and electricity bills can be very high if you are in a villa as you will have to pay your own air conditioning and lawns are expensive to water. On the other hand, they may not so high in an apartment, as AC costs are rolled into your service charge. Apart from service and maintenance costs, other expenses when you consider buying Dubai properties include critical illness cover, buildings insurance if you have a mortgage and home contents insurance.
Pros and Cons of Buying
Advantages
- You build equity: Even if Dubai properties don’t increase in value, you will be building equity as you pay down your mortgage as long as your home maintains its value.
- You can use your home as an investment: If you buy a home and choose to leave it, you can rent it out rather than sell and generate income.
- You have the freedom to upgrade your pad: One of the joys of home owner ship is the ability to decorate according to your tastes. Paint your kitchen purple if you like.
Disadvantages
- You pay for your own maintenance: You need to set aside funds for unexpected expenses, such as water leaks and window replacements.
- Your home is not a liquid asset: If you need to sell due to a job relocation, you may not be able to do so quickly or for as much money as you want.
- Your home could lose value: There’s no guarantee that your home will increase in value over time.
- Buying requires a cash investment. You may need to use up your savings for a down payment and other home ownership expenses.
Pros and Cons of Renting
Advantages
- No maintenance: If there is a water leak, getting maintenance is easy.
- Moving is easy: It is far easier to pack your bags and move to a new rental than it is to sell a home.
- Prices of Dubai properties may not rise:While home values have stabilised and are rising, there is no guarantee that your house’s value will increase over time.
Disadvantages
- Your rent could increase: You could face an increase in your monthly housing payment as soon as your current lease ends.
- No equity: While you may have a place to live, you will not have an asset to sell when you want to move.
- You can’t paint or remodel without approval: If you want to make other changes or upgrade, you’ll have to put in a request with your landlord.
Emerging neighbourhoods
The dream of living in a glitzy neighbourhood that is close to work, the beach, malls and offers gorgeous views, stylish pads and hip nightlife is one that is deeply rooted in our psyche. Of course, living in such a community does not come cheap. The good news is that in a city as dynamic as Dubai, something amazing – if not better – is usually right around the corner. For real estate, this means that if you can’t afford your dream neighbourhood, there is likely to be another great alternative.
Dubai’s housing market has transformed over the last few years and given the rising sale and rental prices, buyers and tenants have had to look outside of the usual neighbourhoods to find a home. So, where do you shop for an apartment when the neighbourhood you want isn’t the neighbourhood you can afford?
With a neighbourhood such as Dubailand growing so popular, there is now a spillover of interest into other communities. Neighbouring areas such as Dubai Sports City and Jumeirah Village Circle are seeing a rise in desirability amongst buyers. Whilst these communities may not have all the amenities one may desire, these areas are evolving to deliver suburban flare with big-city conveniences. With the RTA is planning to expand the Dubai Metro network much further, more passengers will be able to make their way in and around Dubai.
Moreover, improvement in infrastructure across Dubai is inevitable given the upcoming Expo in 2020. With major investment expected to accelerate towards transport infrastructure, retail, leisure and hospitality ahead of the event. This will unlock newer hotspot for Dubai properties, opening up greater opportunities for investor and residents.