Rent vs. Own

If home is where the heart is, then by its most literal definition, your home is wherever you are.

  “Aiga, casa, дома, bayt…” over 200 nationalities call Dubai home, Samoans to Chileans, Moldovans to Germans, nationalities from every corner of the world. Chances are this city has been called home a thousand different ways. Many expatriate residents traveled countless miles in search of economic opportunities, improved lifestyle, or because they considered Dubai a safe haven for their families and their business. Regardless of why they were drawn to the iconic city, a recent study by DIFC Wills & Probate Registry (WPR) found that 64 percent of residents called Dubai home for longer than originally planned. While expatriates are calling Dubai home for longer, does this mean that they are actually buying their homes?

  Somewhat surprisingly, home ownership rates amongst expatriates living in Dubai remains low. As one of the most profitable real estate markets in the world, the question must be asked…why do expatriates continue to rent, especially when they are staying longer, and settling into the Dubai lifestyle?

 Where and when to buy or rent in Dubai is seemingly more difficult every year because the city continuously evolves, and 2018 is expected to be no different. To quote His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, “We are at the start of the road to our vision, for every peak we reach overlooks the next. Only those who strive to achieve are on top,” and in many ways this encapsulates Dubai’s residential development. Coupled with the UAE’s 2021 vision to be among the best countries in the world, Dubai continuously offers something new. The Azizi Riviera, Aladdin City, Deira Night Souq, and Bluewaters Island, to name a few, will open in 2018. So while many expatiates have stayed for five or ten years, the country and city is reborn every year, making each year different from the last. Each new project inspires both tourists and residents, and also provides new opportunities for investment, recreation, and a place to call home.

In addition to the ever-evolving residential property landscape, many expatriates have a strong sense of mobility. The urge to remain mobile may outweigh the desire to own a home, even if the expatriate has enough wealth to meet the down payment requirement. For others, buying a property is considered in many cultures a significant purchase and often associated with a “forever home,” not necessarily a “stepping stone” in a longer journey.

Despite the hesitation to buy for many, the Dubai residential property market is attractive for those who decide to buy. From its visionary leadership, Dubai has become a hub for regional and international networks, commerce, and an ever-growing ambitious property and real estate market. When first meeting someone in Dubai, you often ask: “where do you live?” It tells something about them and often informs where they spend most of their time or the activities that they enjoy doing. A home is not just where you sleep and eat but it is the community and connection to the city that you create. Research has shown community connectedness is a strong determinant of happiness. Expatriates are staying longer in the same communities, and the government has committed to a regulated and innovative real estate market, with their goal being that the UAE to be one of the best countries in the world. 

With a stable, attractive residential real estate market, why are more expatriates not buying their homes? Perhaps, they have not spent adequate time organizing their finances to realize that they can actually afford to buy. While others would like to live in places where they cannot afford to buy, and choose to rent. And still for others, it may be the legal ramifications if they are not able to cover their monthly mortgage payments. Regardless of their reasons, it is worth understanding the rules, regulations, and financial benefits before making a decision. Debunking myths and preconceived notions can help expatriates shift from a temporary Dubai mind-set to understanding the economic, lifestyle, and community benefits of purchasing a home.

It is critical to understand the financial differences. As a tenant you are required to pay annual rental, which based on current supply forecasts, is expected to increase an average of 5% per year. Other expenses associated with rentals include, a 5% broker commission each time you rent, 5% municipality fee, and 215AED ejari registration. When considering purchasing a home, a buyer needs to consider a down payment of around 25%, bank interest rates, service charges (which cost approximately 12AED/sqft) a one-time 2% brokerage fee, and a Land Department transfer fee of 4%. When many expatriates breakdown the costs, compared with long term renting, and add the lifestyle and community benefits, purchasing their own home remains a very attractive option. Purchasing allows expatriates to invest for the future, and considering the length of time expatriates are staying in Dubai, it makes the most financial sense.

As we ring in the New Year it is worth contemplating your future, making an investment in the place you call home.