One of the most emotive discussions which occur regularly on social media in UAE is whether to buy or rent a property during your stay in the country. The following focuses on living in the property, investing in real estate is a different topic which I am happy to discuss with you if you contact me.
Buying a property involves the commitment of a significant amount of capital as well as investment risk.
Dubai’s market is ‘cyclical’ with significant swings both positive and negative. The degree of positive and negative swing is far greater than in most developed markets.
At the time of writing, for an expatriate to buy their first property they will need to have a deposit of at least 25% of the property purchase price. Subsequent properties require a 50% deposit.
In addition to the deposit, there are registration costs for the property and a separate fee if registering a mortgage (loan). Estate agents fees are also significant.
Most owners have an annual maintenance contract covering emergency call out for plumbing, air conditioning servicing and electrical problems. The cost of these varies widely depending on the level of service required.
Some banks will insist on a buildings insurance policy. It is prudent to have at least a buildings insurance policy in place to cover against fire and other disasters.
Most properties which can be purchased by expatriates are located within communities. These communities have community fees. These should be factored into your living expenses.
Rental Income from a real estate is not taxable within the UAE.
RERA (Real Estate Regulatory Authority) regulates the landlord/tenant relationship.
When renting a property, the tenant is only responsible for the rent. In a country where debt laws are extremely harsh on defaulters, this can be a great benefit given the unpredictability of expatriate life.
Consequently, for many expatriates, buying a property would not make sense. The costs associated with buying and selling when they leave would not have a reasonable chance of being compensated for over a couple of years. Longer-term expatriates my find they are better off with their own property. However, there are significant risks.
Buying real estate requires a substantial amount of money. When the money is borrowed the majority of repayments in the early years are interest. Consequently, the bank is receiving what would have been your ‘rent’. With interest rates at record lows, the possibility of rate increases is likely. These rises should be factored into your monthly budget.
Buying and selling property involves transaction costs which renters do not incur.
Renters do have the annual problem of rent reviews and potential eviction. Rising rents put a strain on the family budget although falling rents can yield an unexpected bonus. The possibility of moving each year creates an unsettling feeling. Moving costs should be factored into any analysis. on a regular basis should also be factored in.
What Should I Do Next?
Please contact us for more information on property in Dubai.