Renting - The Cons:
• Inability to make changes: If you enjoy making a house a home, you will be restricted to carry out any renovations within the property.
• More long-term expenses: Years’ of renting will build up significant outgoing costs with no tangible asset to show for at the end. By considering your longer-term plans and monthly rental payments, you can assess how much you will end up spending and make an informed decision that will best suit your financial needs. Since the recent decline of property processes seen across the region, many are now taking the opportunity to benefit from lower house prices rather than continuing to pay rent.
Buying – the Pros:
• Long-term investment: Whether you’re buying to live in the property, or to lease it, or even to sell it, you are paying your mortgage towards a longer-term asset.
• Ability to settle: Owning a home provides you a sense of stability and security, and aside from the usual fluctuating interest rates, your monthly payments will be more stable than a rental market.
• Opportunities: Unlike renting, buying a property presents you with a number of opportunities which could generate plenty of revenue. Some home owners now live off revenue generated by property leasing, offering them even more financial gain.
Buying – the Cons:
• A number of recurring costs: Owning a home comes with a surprising variety of expenses that renters do not directly pay. These include maintenance fees, insurance fees, mortgage payments.
• Higher initial costs: In recent years, 25% in cash, 4% in DLD charges, and 2% agent fees add up to 31% of the net price which needs to be paid up front. However, by researching different developers you can find down payments as little as 5%.
• Fluctuating market: Like any market, fluctuations can cause some financial losses if the owner is leasing the property or if the value decreases.
To conclude, to purchase or to rent is a common question that residents commonly face. However, the decision cannot be made lightly, and a lot depends on your requirements and financial condition. Buying a house is one of the best investment options to grow your capital and give financial and personal security.
And finally, what do the market experts say?
According to Cluttons Middle East (now acquired by Savills), market activity in studio, one, two and three-bedroom apartments, valued at a price point below AED 1.5 million, is the most active segment. In their opinion, it currently makes more financial sense for hopeful end-users who wish to offset the cost of rent to buy at these levels.
Richard Paul, Head of Professional Services for Cluttons Middle East, said: “At this price point one and two-bedroom apartments in an established area are dominating most of the activity in the market. Cluttons said their advice can also be applied to expatriate families looking to break-even on rent and invest in multiple assets in Dubai.
“For a family that has money to invest, we would also advise to stick below AED1.5 million price point, which represents the most stable market segment currently,” added Paul.
“At this price point, even if the decision is to lease the property investment out, post-acquisition, a purchaser should expect a 7-9% gross yield in some areas and subsequently after interest payment, service charges and upkeep, there is still good profit rent to be achieved.
”Craig Plumb, Head of Research at JLL MENA, said: “The majority of expatriates in the UAE have traditionally sought to rent rather than purchasing properties. As the market has become more mature (with less price vitality than in previous cycles), expatriates can be more confident to buy at close to the bottom of the current cycle to benefit from potential long-term capital growth. Recent changes to visa laws, allowing 10-year residency for certain groups of expatriates is also likely to increase demand to purchase property in the UAE for their own occupation.”
Considering buying a home? Make your purchasing decision at Cityscape Global 2019... you can browse through the latest apartments and villas, laisse directly with the developers and get expert advice on finances and regulations to make your buying process as easy as possible. Register here to attend.