Buying A Property
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 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
Buying a property involves commitment of a significant amount of capital as well as investment risk.
Unlike developed markets where property prices are relatively stable, Dubai’s market can best be described as ‘cyclical’ with significant swings both positive and negative.
At the time of writing, for an expatriate to buy their first property they will need to have a deposit of 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 for registering a mortgage (loan). Estate agents fees are also significant.
On-Going Costs and Rental Income
Most property 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 the property against fire and other disasters.
Most properties which can be purchased by expatriates are located within communities. These communities have community fees. These fees can be significant and should be investigated before buying the property.
Rental Income from a property is not taxable within UAE.
Renting a Property
The landlord/tenant relationship is regulated by RERA (Real Estate Regulatory Authority).
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.
Whilst renting a property may be seen as ‘dead’ money, the reality is most people who come to Dubai for a short period would not be suited to buying.
If a person buys a property using a mortgage, a substantial amount of money is required up front and the mortgage repayment in the early years is mainly interest and not capital repayment. Therefore buyers are just paying the bank instead of the landlord in the early years.
Buying and selling property involves transaction costs which renters do not incur.
However, with rents renewed annually, landlords are notorious for requiring tenants to vacate the property which leads to moving costs on a regular basis, an inability to feel settled and not being able to make the property feel more like home.
What Should I Do Next?
Please contact us for more information on property in Dubai.