For prospective buyers, the decision between buying vs renting is circumstantial. It boils down to individual circumstances, including factors such as perceived security, long-term residency plans, job stability, and the desire to establish roots in Dubai.
For those planning on residing in Dubai for five years or more, the financial benefits of purchasing over renting become apparent when considering the overall return on investment. Even in scenarios where the market experiences a cooling period, individuals who opt for mortgage payments over rent for a similar duration typically find themselves in a better position.
Owning a property offers the potential to either rent it out or sell it for a profit. If your tenure in Dubai is relatively short-term, opting to rent may be the more practical choice. Purchasing property entails entry costs and exit expenses. Therefore, if you plan to stay for one to three years in Dubai, renting is likely the better option.
Dubai’s affordability appeal in real estate
In recent years, the Dubai residential market has witnessed a well-documented surge in prices, compared to levels seen three or four years ago. However, it’s crucial to consider the emirate’s position on a global scale. Despite recent increases, Dubai remains relatively undervalued when compared to other major capital cities worldwide, including Paris, Singapore, London, and select regions of the US. This favorable affordability factor continues to attract individuals toward Dubai as a preferred destination.
Looking at the number of buyers we are registering at Espace Real Estate along with the volume of transactions occurring, everything points towards a further price increase, albeit maybe not to the same extent as what we’ve seen over the previous couple of years, but points to be towards a 5 to 10 percent price increase throughout the course of 2024. If you intend to purchase and stay in Dubai for an elongated period of time throughout the course of your Dubai experience, I advise buying vs renting because, in my view, current prices are likely lower than they will be in the next 12 months.
Many clients often ask about the possibility of the market declining and what would happen in the worst-case scenario. I always advise them to consider the absolute worst-case scenario. For instance, if they were to lose their job suddenly and had to leave Dubai urgently, they need to evaluate their ability to repay the mortgage and the potential rental income if they were to rent out the property.
It’s crucial to buy within one’s means, considering that markets can fluctuate. However, it’s important to remember that what goes down must eventually come up, and vice versa. Therefore, I always stress the importance of purchasing a property that aligns with their financial capabilities.
For instance, if their mortgage repayment is AED15,000 per month, totaling AED180,000 annually, they should assess whether this amount is covered by potential rental income, even during the lowest market conditions. While this scenario may seem extreme, it ensures that the property won’t become a financial burden in the event of unforeseen circumstances.
Even though we may not experience market downturns similar to those in 2020, having this safety net provides peace of mind. In the worst-case scenario, if they own the property, they can rent it out and eventually sell it for a profit down the line – a strategy that has been historically successful in Dubai’s real estate market.
