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Is It Cheaper To Buy Or Rent A Property In Dubai?


When you consider other items like a car, it is always cheaper to buy than it is to rent, so is this true of residential property and in a city like Dubai? Many external factors could impact whether it is going to be cheaper for you to buy or rent a property in this city, and irrespective of location, the property cycle plays a massive part in this decision as well.

The Role Of The Property Cycle

Factors beyond our control as purchasers dedicate the ‘health’ of the property market. When it’s in peak health or a ‘boom’ excellent prices are paid to secure a property. In the boom phase of the property cycle, vendors sell to achieve maximum sales price value. It’s a ‘seller’s market’, and real estate agents are busy. Property can be cheaper to rent than to buy in the boom part of the cycle.

A slow down or slump follows the boom in the property cycle. Fewer properties are listed for sale and the average number of days to sell are more than in the growth. A property left on the market unsold for weeks on end is a real sign the market has turned downwards, and impatient vendors will drop the sale price or take it off the market until the boom returns.

A bust or ‘bottom’ of the market is the lowest point where confidence is at rock bottom. Sellers only sell if they have to when it is a ‘buyer’s market’. Property purchasers can buy a property for below market value and secure instant equity, so this is a busy time for property investors while real estate agents are hunting for work now there are fewer properties for sale.

In a slowdown and indeed, the bottom of the market, buying a property is usually cheaper than renting.

Look At All The Associated Costs

There is the argument that renting is cheaper than homeownership, and during the downturn in the market and the economy, there are valid reasons to support this point of view. When it comes to renting a property, you don’t own it, so you don’t have to pay all of the fees that homeowners do. A lot of people say that renting is dead money but should it be considered any different from the other expenses incurred as part of your life, i.e. travel, food and entertainment? There are pros and cons for both renting and homeownership.

Homeownership Costs

When you buy a home, you have additional purchase costs, other than what you pay for the property itself as well as the ongoing costs of homeownership. For example, your purchase costs may include stamp duty, mortgage tax, a building inspection, and a valuation for a mortgage plus the lawyer’s fees for their role in the sale and purchase property transaction.

Ongoing costs of owning a property include property taxes, i.e. rates, insurance, maintenance, and so on. While you won’t incur these expenses when you rent a property, you’ll also miss out on the financial gain, also known as ‘capital gain’ from a future sale.

Owning a home is the biggest asset for most people and paying down the mortgage and seeing the rise in value over time provides a healthy nest egg for retirement. Once you’re on the property ladder, you can and most likely will buy and sell your home five times during your lifetime, each time upgrading and then eventually downgrading as your requirements change with age.

How Long Will You Live There?

There is no right or wrong when it comes to renting or buying a property. Personal circumstance will always dictate the outcome. If you move to a new area like Dubai, you’re more likely to rent for a while, and if you’re like so many ex-pats, you realise it’s a great place to live, and you’ll want to stay.

Like with any region, there are risks buying property, and there are rewards too, so whether you rent or buy, your decision should be based on timing and where the market is in the property cycle.