Here for the long haul? Then perhaps it’s time to put down some Dubai roots and making the switch from renter to homeowner
No-one likes to throw money away on rent, but switching from tenant to homeowner is a big step and a major financial consideration. Betterhomes has been on the ground helping Dubai residents for over 30 years, and we think it’s a great place to invest. Here are five good reasons to consider buying a home…
- Recent price reductions now show real value
- Low interest rates mean repayments are low (often lower than renting)
- Equity upon selling (paying down the mortgage with hope of capital growth)
- If you leave, you can rent it out an earn an income
- You can remodel and renovate to add value.
What the real estate agent says
Richard Waind, Managing Director of Betterhomes answers common questions on buying a villa or apartment in Dubai, looking at both the pros and cons.
Is it a good time to buy a home in Dubai?
We are seeing more and more expats choosing to own rather than rent. There are “This usually depends on personal circumstance. But for those with the means and the desire to buy, an increasing number of investors and end users are returning to the market due to the value they see in today’s prices,” says Richard. “We have seen prices drop by approximately 35% since the last peak in 2014, which is making property ownership more affordable for many UAE residents. There is lots of new supply still to come to market, but the population is growing, and the government is taking lots of steps to support this through new residency visa initiatives and business reform. So, if you are thinking of buying and you are taking a mid to long-term view, it’s a very good time to invest.”
What are the other benefits of buying a home in Dubai?
The main benefit of owning is that, upon selling, you will have some equity in the property through mortgage repayment, and hopefully some capital gro”The main benefit of owning is that, upon selling, you’ll have some equity in the property through mortgage repayment, and hopefully some “The main benefit of owning is that, upon selling, you’ll have some equity in the property through mortgage repayment, and hopefully some capital growth,” says Richard. “While not all property investments see capital returns, buyers in today’s market might be more positive about prices in the next five years than the last five years. Even if prices remain flat or soften slightly further, a buyer who bought today and paid down their mortgage is likely to have a nice amount of equity in five years. Anybody renting over the same time will likely have paid out more on a monthly/yearly basis but have nothing to show for it at the end of the tenancy.”
What if I don’t have the 25% down payment?
“For those who can afford it, buying makes a lot of financial sense,” he continues. “For those who don’t have the 25% deposit, the off-plan market has some fantastic offers from developers. Down payments for off-plan properties are typically around 10% with subsequent payments due through to handover.”
How much can I borrow?
“Home loans are capped at 75%, which means your monthly mortgage payment covers 75% of the property value plus interest. Valid for a period of up to 25 years, fixed rate mortgage products, (which usually run for a maximum of five years before switching to a variable interest rate), currently range from 3-4%.”
Before you buy, ask yourself….
How long do I plan on staying here?
If it’s only a couple of years or there’s a strong possibility that your company might relocate you, and the thought of renting your home out down the line sounds like too much hassle, stick to renting.
Can I really afford it?
How stable is your job? If you have a regular income and your company is How stable is your job? If you have a regular income and your company is doing well, it’s potentially less risky. Word of warning: your mortgage is linked to your residency, so if you do leave Dubai, your mortgage will either need to be paid off (cash or house sale) or you’ll need to renegotiate the terms with the bank (if you want to rent it out, for example).
Can I afford the down payment?
The first hurdle is the average 25% up-front down payment (a significant aThe first hurdle is the average 25% upfront down payment (a significant amount for any investor in any market) as well as the mortgage repayments. Personal loans cannot be used to finance down payments for property investments in the UAE..
Breaking down the cost of buying home in Dubai
A hefty down payment isn’t the only financial outlay with a number of upfront fees and related home purchase costs to build into your budget. These add up to around 7% of the total purchase price and include:
4% Dubai Land Department (DLD) transfer fee (based on total property purchase price)
0.25% DLD mortgage registration fee (% of total agreed home loan) + Dhs290 admin fee
Dhs2,000-4,000 property registration fee (dependent on value of property)
Dhs2,500-3,000 property valuation fee
Bank mortgage set-up fee (could be zero, or anywhere up to 1% of total loan amount)
2% real estate broker fee, plus 5% VAT for agency fee
4% Oqood fee for off-plan sales only
Plus, once you’ve bought, there are annual community service/maintenance fees to consider too.
*All Prices listed are as per 2019.