BackDue to its social climate and future-focused economy that are supportive to investors, Dubai continues to hold its position as a top choice among foreign investors. Reformed visa laws and ease of regulations have also contributed to Dubai real estate's explosive expansion.
As a result of strong demand from investors and end-users, the Dubai real estate market continued its expansion throughout the third quarter of 2022. But when expats are faced with the old adage: “Should I buy or rent my property in Dubai?”, to that we respond honestly: There is no straightforward answer, and the decision will rely on a number of factors.
There are several questions one needs to ponder on and factor in while considering buying or renting:
- What are your long-term plans?
- Do you have 20% of your property value as your down payment?
- Is your job 100% secure and stable?
- Are you aware of the yearly service charges associated with your property?
- Are you ready to transition to ownership?
- How are Dubai property prices fairing up compared to Europe or America?
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If your long-term plans are not well defined, and you don’t intend to stay in Dubai for at least five years, renting may make more sense, as a safer, more flexible choice, especially given the recent rising interest rates. The two main benefits of renting are flexibility and less responsibility with the property.
However, if you are looking for a secondary or permanent home, or for a ready-made investment opportunity, buying property in Dubai will be a good choice.
It is now simpler for people to regard Dubai as a more permanent home. With Covid 19 restrictions gone and the introduction of new visa systems significantly benefiting all expats and visitors, the market is boosting the buyer sentiment in real estate.
UAE has always adopted effective policies to deliver excellent living standards and safety to all expats, therefore generating a new wave of foreigners and investors eager to set base in Dubai long term. Many first-time buyers are also lured to the market as a result of this.
There are many other factors to look at when deciding whether to buy or rent, beyond just the rental or mortgage costs. There are variable costs one needs to factor in, such as maintenance and service fees, or insurance fees.
On the other hand, rents have increased in prime areas between 25% to 45% in the last 18 months, so now could be the time to take the plunge into ownership. You can easily use the rent amount you pay for a two-bedroom flat in Dubai over a few years, as a down payment on your Dubai home.
Current Rental Trends
Market is busy and more active than ever, with rentals in Dubai being at an all-time high. Housing costs have increased in the affordable segment due to the rising demand for rental accommodation, while luxury rentals have soared in some places by up to 43%.
The sharp increase can be attributed to Dubai’s growing population, as well as the flexible resident visa programs recently introduced, which attracted a growing number of expats. After prices increased, the average annual rent for a villa, or family home, in the emirate, reached around 268,758 Dirhams.
Residents continue to place a high priority on villa rentals in master communities that provide a variety of amenities and a strong gated community feeling. Having said this, the lack of supply is pushing up villa rentals and sales prices in this category.
Although the trend is not reflecting as much in the apartment rental sector, there is a steady increase in demand for beachfront properties and turnkey luxury serviced apartments, especially in Downtown.
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Property Sales in Today’s Market
Dubai's reputation as a safe haven for international investors is driving the demand for Dubai real estate and the appetite for luxury properties on an explosive trajectory in 2022.
On that note, has there ever been a better time to invest in premium real estate assets than right now when Dubai's property market is at a 12-year high?
The market is facing a challenge to keep the supply and demand on a sustainable level, as supply needs to catch up with the rising population of Dubai. According to Dubai’s 2040 Urban Masterplan, Dubai's population is expected to grow from the current 3.5 million to 5.8 million residents.
If we look at a Palm Jumeirah property in Shoreline apartments for example, in the current context of rental value, we’ll find three-bedroom apartment rents from 210,000 up to 240,000 Dirham per year. Current purchase price is somewhere between 3.1 to 3.5 million Dirhams.
All aspects facted in, the property is still 13% cheaper to buy than it is to pay annual rent (if you can hold the property for ten years).
As far as rental yields are considered, if you are looking to buy with a mortgage, you need to consider the cost of the debt plus interest. If you own the home after 25 years versus paying rent for 25 years, at the end of the mortgage term, you will have zero debt and 100% ownership, plus capital appreciation.
From that perspective, right now is a better time to buy.
Price Comparison
The recent UBS Bubble Report currently states that the UAE market is in fair value compared to a large number of more established markets in cities such as Toronto, Munich, Hong Kong, Tokyo, or Miami, which are all seen as overvalued.
Prime properties in Dubai are up to four times lower in sale value compared to other global destinations such as Hong Kong, New York, and Paris. Hence, affluent buyers are more than happy to scoop up premium homes in Dubai and most likely hedge against the inflationary climate well known around the world at the moment.
The Real Estate Market Set to Grow Further
Dubai property market is set to finish the year on a very high note, heading for a strong end to 2022. We will continue to witness the growth momentum well into 2023 and beyond, due to the rampant demand and strong performance of the market.
While looking for your next dream home, finding the right real estate company to provide you with proper assistance and a seamless service experience, is the key. LuxuryProperty.com is your luxury brokerage in Dubai, showcasing an impressive portfolio of properties for sale and rent.
If you cannot make up your mind whether to buy or rent your next property, our team of trusted client advisors is ready to assist you with most comprehensive guidance and impartial advice regarding your options.
Extending my thanks to Mark Richards, LuxuryProperty.com Sales Director, for his valuable insight on this topic.
