_Renting or buying property in Dubai - the pros & cons

The UAE’s has developed at a rate which arguably is unmatched. With its offer of world-class education, healthcare, employment and investment opportunities – all backed by an eclectic mix of lifestyles and cultures – means the country is now considered by many as a critical global destination. Therefore, it will not come as a surprise that the average length of stay for Expats has slowly increased over recent years.

June 30, 2019

Yet despite all the benefits, historically, with residency often linked to employment visas, there has always been a term limit on the length of stay. As a result, many Expats have chosen not to invest in residential property, choosing instead to rent – sometimes for a few, sometimes for many, many years. Given the relatively low costs of ownership and transactions costs across the UAE, this can prove to be an overtly unwise decision (we discuss the financial costs here), yet an understandable one given the uncertainty relating to long-term residency options.

However, now with the introduction of five-year renewable retirement visas (for properties over AED 2m), five-year renewable for those investing over AED5m in property, and the issuance of 10-year visas for selected professionals. We discuss the pros and cons of buying versus renting with some additional comments from our expert residential consultants.

Buying a property in the UAE:

Pros

Revenue generation: Buying a property, unlike renting offers a number of opportunities which could generate revenue, such as purchasing a property as an investment and leasing it.
A place to call home: There is a sense of stability and security when owning your own home and your monthly payments may be more predictable than in the rental market.
Long-term investment: You are paying a mortgage towards a longer-term asset – this is whether you’re buying to occupy the property, lease it as an investment, or even to sell it after a period of time.

Cons

Regular costs: Owning your home comes with additional costs compared to renting. These include insurance, service charges, maintenance and of course mortgage payments.
Changing market dynamics: Property prices can fluctuate due to changes in the market and prices can fall. However, there are also benefits when markets improve and gains can be achieved.
Initial purchase’ costs: Upfront costs such as 25% for a deposit payment, 4% in DLD charges, and 2% agent fees add up to 35% of the purchase price, all of which need to be paid up front.

Renting a property in the UAE

Cons

Long-term expense: Keeping in mind longer-term plans and monthly rental payments, you can assess how much you will end up paying and make an educated choice that will best suit your financial needs, as years of renting can build up significant outgoings with no tangible asset to show for it.
Adapting your home: If you enjoy DIY, you may be restricted by the landlord.

Pros

Flexibility: If you aren’t sure about your employment plans, or how long you will be staying, renting allows you more flexibility and can allow more freedom.
Commitment: You can commit to the exact length of time you require, however short this may be.
Less short-term financial outgoings: You avoid paying upfront fees such as DLD fees, registration, mortgage registration, agency, valuation and maintenance fees if purchasing.

What the experts say?

Taimur Khan, Head of Research in the UAE for Knight Frank Middle East, commented, “Since the recent softening of property prices in the UAE, many people are now taking the opportunity to benefit from lower house prices rather than continuing to pay rent. But it really depends on a person’s requirements and financial condition, though buying a house can be one of the best investment options to grow your capital and provide financial and personal security.”

Also read a similar article: Why long term expats should invest in Dubai