Espace Real Estate, one of Dubai's leading real estate agents, reveals the top five points to consider when considering buying versus renting in Dubai, United Arab Emirates (UAE) in 2023.
Espace Real Estate urges residents to be aware of the current trends and costs affecting the real estate sector. Demand for rental units has increased due to the new residency and visa policies.
In addition, property prices and rents fluctuate depending on the popularity of the location and proximity to leisure, entertainment and commercial centres. Factors such as upfront fees, location and contract length play a crucial role in a household's decision to purchase or rent a home.
Fees such as mortgage deposits, mortgage registration fees, Dubai Land Department (DLD) fees, real estate brokerage fees, bank mortgage arrangement fees and property valuation fees can add up to 31% to 32% of the property value.
When choosing a property to rent, tenants must incorporate the magnitude of appreciation or depreciation to take into account the possibility of rent increases, as landlords and owners can be entitled to increase annual rents by 5-20% in the event of a rising market, according to the DLD Rent Index, provided the tenant receives a 90-day notice period.
In the long run, Dubai residents looking to rent will inadvertently incur higher overhead costs. For example, a tenant seeking to rent a three-bedroom villa in The Springs neighbourhood at an annual rent of Dhs180,000 will incur average management costs worth Dhs919,100, including rent paid over five years, security deposit and real estate and DLD fees.
In this case, residents are advised to buy rather than rent, which will result in greater cost savings. For example, purchasing the same three bedroom villa worth Dhs2.8 million for five years would generate a cost saving of approximately Dhs273,464*.
Financial Positioning
Buying or renting a property requires a substantial long-term commitment and is entirely dependent on the financial backing or financial position of the resident. Buying a property in Dubai requires a down payment of at least the principal amount of the property. Flats, villas or townhouses worth less than Dh5 million require a 20% down payment, while properties above the same value require a 30% down payment.
The quick response time for residents to make a down payment to secure a unit can ensure that the principal price of their future home does not increase, as demand from multiple buyers or tenants can drive up prices. In the current climate, with an increase in international investors, and given that rental prices are at an all-time high, financially savvy residents are advised to invest in their property purchase to get the best return on investment (ROI).
A very important question tenants must ask themselves is the length of time they plan to live in the UAE. From a financial point of view, it is recommended that tenants living in the UAE for two years or less rent, rather than buy, as this gives them the freedom to live in different communities across the country and provides the flexibility to limit their liabilities in the short term, allowing for greater financial freedom.
When residents decide which route they wish to take, they need to consider seeking a reliable agent or brokerage that offers quality and flexible services, including competitive mortgage rates, experience, market knowledge, and the added value they bring to potential clients.
Espace Real Estate, comprising over 170 RERA accredited real estate agents, offers a suite of world-class real estate related services tailored to meet all real estate needs, including residential, sales and lettings, mortgage services, property management and short term lettings.
Lifestyle preferences
Location is everything and residents should consider their non-negotiable terms when buying or renting a home in Dubai. This includes living closer to their children's school or finding a home closer to their workplace to reduce commuting time.
Easy access to Dubai's transport and business centres should also be taken into account in the decision-making process. For example, properties close to Dubai Metro stations or near shopping centres such as the Mall of the Emirates are more expensive to rent and buy than properties in Dubai Investment Park.
In addition, residents seeking the freedom to live are being advised to buy rather than rent, which may otherwise restrict tenants from renovating their homes under a lease.
"2022 was an amazing year for Dubai's real estate sector, which continued into the start of 2023 and showed no signs of slowing down. Despite rising interest rates, demand continues, especially at the luxury end of the market.
At Espace Real Estate, we expect property sales to exceed market expectations across Dubai's popular neighbourhoods, including The Palm Jumeirah, Downtown Dubai, Dubai Marina, Emirates Living, Arabian Ranches, and many more flat and villa areas," Lyons concluded.
