Should I Buy a Property or Rent a Property? A Simple Guide!

BUY vs RENT a property in Dubai?

“Oh, the real estate market…..!”, said one of my friends, “is the gaming field for the rich and moneyed people”. I was perplexed by his response. He was replying to my query related to whether should I buy or rent a property in UAE especially Dubai.

Why Dubai? Because this is where the real pulse of the real estate market lies. Abu Dhabi, though a quiet player, does offer opportunities. But Dubai has been the front-runner when it comes to buying real estate.

Buying or Renting in dubai which is better

I currently rent a flat in one of the decent communities in Dubai and I am very happy living there. The rents are reasonable with 24 hour security and other amenities as well. However, I thought to myself, ‘why should I be paying rent when the same rental payment could go towards my mortgage payments.’

Well, I guess everyone who thinks of buying a house asks this same question. That led me to ask, should I Rent or buy an apartment.

At the outset, let me be clear that this is my opinion and should not be construed as final.

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Check out the below chart – Buying Vs Renting

buy vs rent.PNG

(The above image is from Trulia. You can also check out the chart yourselves here)

I am listing below the things you may consider before making the decision whether to buy or rent a property.

For Example: My monthly rental costs are, let’s say 3500 and I would like to buy a house worth 1.5 million with a 20% down payment.

Simple calculations will show that my monthly mortgage on 1.2 million property at 8% rate for 20 years will be around 6516 while my rent is placed at 3500.

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Advantages of buying a house in Dubai

1. You are the owner of the house and whatever payments you make towards the mortgages are towards owning the house. Ultimately, the property becomes your own.

2. You will have the independence to customise interior of the house as you like. You do not need to ask for any permissions. (Note that some communities do require you to seek permission of the Developer)

Think twice before buying house in Dubai – Disadvantages of Buying a house:

1. You may be buying a property for 2 reasons. One is to live in the house and Second is to Rent it out or investment purpose. In case of the second option, you may need to look at the Price to Rent ratio. This means you will need to look at the Costs of Purchases against the Rent it brings. The rate of return on rentals should definitely be higher than the interest payments on your mortgage. 

2. Bad Tenants- Not all tenants are good. For your luck(or bad luck), if you end up with a bad one….

3. Maintenance costs – One of the most recurring costs of owning a house is the maintenance costs that come with it. In certain areas these are higher than others.

4. Dynamic Markets – Dubai is a very dynamic market and is easily prone to the tremors of international events and situations. Think about 2008 when the whole market plummeted and brought the entire economy to its knees.

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Steps to take to minimise the risks in buying property in Dubai?

1. Property Valuation: Before you decide on buying a property, get a professional valuation done. Each and every property is unique even though they are on the same floor. Do not fall into the talks of a friendly broker or forum talk. Always involve professional help.

2. Quality of construction: When you decide to buy a property, make sure the quality of the construction is superior.

3. Buy in stable areas: There are umpteen number of developments in Dubai and making a choice is quite tough. So make sure that you buy in stable areas in Dubai like the Marina, Greens etc. Do a due diligence on the developer.

By no means I am discouraging anyone from buying a property. Property investment can be good investment if you study the fundamentals and not heed to market sentiments. Always take precautions as mentioned above. Be prudent. Don’t be a sheep.

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Why do I rent a Property in Dubai?

1. Maintenance: Since I am not the owner of the property, all the maintenance related work is conducted by the owner of the house.

2. No Mortgage or Home Loan: A mortgage loan or a home loan can be a burden on your finances since you end up paying a huge down payment and also a monthly installment. I would have no liability.

3. Independence: I can vacate my premises at any time whereas if I bought an apartment, the selling process is long and hard.

My Conclusion on whether to buy or rent a property in Dubai:

As far as my current situation, I am better off renting an apartment in Dubai. I may make a decision to buy a property if I spot a good deal. However, current market trends do not offer me any opportunities.

Do you have your own reasons to buy or rent a property in Dubai? Let me know.

Disclaimer: This article is mainly intended for Freehold property buying/renting for  expatriates and may not be suitable for UAE Nationals.

Infografic by Better Homes: Buying vs Renting a property in UAE/Dubai

Better Homes, a leading property broker in UAE, recently published an infografic on what is better, whether buying or renting. Although I do not agree with their findings, it makes a good read. 

About Deepak 505 Articles
Deepak is a passionate blogger with interests in bitcoin, online marketing, and writing.

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