Should You Rent or Buy Property in Dubai?

Summary: If you’re planning on moving to Dubai you’ll be faced with the question – should you rent or buy Dubai property?

I wondered whether this article should really appear in the ‘Living in Dubai’ section of this website – after all anyone faced with the dilemma of ‘rent versus buy’ is obviously actually going to be living in the country in question – but, well, hey, it’s more about the state of the property market in Dubai and so that’s why it’s here in this section!

So – should you rent or buy property in Dubai?  Good question!  And a question being asked by an increasing number of expatriates moving to the emirate, because on the one hand they are well aware that Dubai’s real estate market is dynamic, exciting and in demand - and on the other hand they are also well aware that mortgage payments can be higher than rental costs and some people are saying that Dubai’s property market has risen too high too fast and may now be due a negative correction…so what’s the answer?

The answer is – it depends! 

It depends on how long you’re going to be living in Dubai, the type of property you’d ideally live in, how quickly you’re likely to want to release your capital, whether you’re happy to hold on to your property asset for the long term and whether it is essential that you get enough rent to cover the mortgage and/or an increase on your capital outlay quickly.

The reason it depends on all of these criteria is because the property market in Dubai is in transition.

Once upon a time back in 2002 when it first became possible for foreigners to buy and own freehold property in Dubai, the cost of a mortgage was less than the cost of rent and prices for Dubai real estate were comparatively very low indeed – if only you’d known then what you know now eh? 

But nowadays the supply of property stock coming to the market is beating demand and so prices are vulnerable.  And yes, prices have risen high and fast and such increases are currently unlikely to remain sustainable.

What all this means is that if you’re going to be living in Dubai for three years or less it probably makes more sense to rent a property than to buy a property.  Rental rates are expected to come down because, as stated, the number of completed properties becoming available is increasing rapidly at the moment.  Many of these units were bought as investment properties with the owners now requiring a rental income from them. 

Additionally, because locally mortgage costs have been going up it has reached the point where you can rent for less than you can buy in the majority of cases.

So, if you’re going to be living in Dubai for the short term, the amount you pay out to buy a property will be more than you will pay for rent – and if you then come to resell you may well be trying to resell at a time when many others are in the same position.  This will mean prices will be weak – possibly lower than what you bought the property for – and it will be a buyer’s market.  I.e., if you’re taking a short term view of Dubai’s real estate market you could get your fingers burned.

Alternatively – if you take a longer term view you could do very well indeed.  For example, if you plan on remaining in Dubai for the long term and you buy a property with a mortgage you will have paid off the mortgage and have a tangible asset at the end of the period compared to those who rent who will have nothing to show for all the money they have paid out.  You can then sell or rent out your property and take all the profits.

There is a viable alternative for those who are really only planning on staying in Dubai for the short term, and that’s to buy an in demand property in an in demand location that they can live in for the duration of their sojourn in the UAE and which they can then easily rent out when they leave.  This will mean they have a tenant paying at least most of their mortgage repayments and in 15 – 20 years time they too will have an asset that they can resell and reap the profits from.

All of these strategies are of course dependent on the assumption that the property market in Dubai will continue to rise in intrinsic value.  And again, over the short term this is a risky assumption to make – but over the longer term as market analysis and statistical trends show, it’s entirely possible that because Dubai is such a key location for business and tourism it will maintain a healthy and prosperous property market.

Hopefully you can identify an answer to the ‘should you rent or buy property in Dubai’ question that is specifically pertinent to your personal circumstances within this article!

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