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Sure, rents are down, but any rental decline will remain limited compared with those currently seen on property values. Image Credit: Virendra Saklani/Gulf News

Among the most fundamental - and practical - dreams people share is owning a home. But why is it that not everyone succeeds in this? Economics plays a significant role in the overall scheme of things.

So, given the opportunity to purchase a property - or your home, no less - would you not hold on tightly and make sure you “own” it? In Dubai, while there has been a correction in rental values, it has essentially lagged behind the correction going on in property values. And I do not believe the general rent decline will exceed 10 per cent in most areas.

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Owning a property is essential to underpinning the accumulation of wealth and building networth. Obviously, the accumulation of the asset itself must be done with a high level of diligence and care and the vast majority who have taken the step towards property ownership have benefitted significantly. The essential question to ask is: “How do I use my money to increase my wealth instead of the wealth of my landlord?”

Doing away with a needless expense

Owning property allows you to change the application of your hard-earned dirhams from covering an expense that offers you no financial return to investing in an asset that does. In a way, it’s a forced form of saving that will reap benefits for you in the future.

Conversely, paying rent actually detracts from your ability to build networth because, not only are you paying out for no financial gain, but you are at the mercy of rental inflation as well. This is a problem because you are consistently being asked to pay more while your salary increases are lagging, effectively eroding your ability to build wealth.

By owning your home, inflation is working in your favor because, in all likelihood, the property is increasing in value and, if kept for a certain number of years, will enjoy an inflation-driven compounding effect on its value. This allows the owner to build networth through capital appreciation of the property – something important for your financial future.

Stated intent

The fundamentals of buying real estate in Dubai are no different from those elsewhere. As an expat, you may be even more anxious regarding the decision to buy which is all the more reason to stick to some tried principles.

First of all, be very clear as to why you are investing in real estate. Whether to provide the family with a home, generate a steady stream of income or build equity for the future, make sure about what the expectations are and quantify them wherever possible. Plan for the long term and can be rewarding if you ride out one or two cycles.

If you have the cash to pay, I suggest you pay for it outright. However, don’t be afraid to take out a mortgage and make the purchase as at least your repayments are building equity, not being lost forever on rent.

Picking an option

As always, stick to the basics. Properties which are close to the beach (especially with a sea view), a golf course view or part of an iconic development such as Downtown Dubai is a good place to start. If you can have close access to the Metro, even better. These are more likely to provide superior appreciation in capital value as well as be able to ride out cyclical volatility with less distress.

You also need to consider the effectiveness of the owners association, service charges and the quality of maintenance services. Facility management is becoming increasingly important to determining the value of buildings, and it will have an effect on the long-term value of your investment.

If you cannot find a property immediately that will satisfy your requirements and objectives, do not settle for less, regardless of what’s happening in the market.

- Mohanad Alwadiya is CEO of Harbor Real Estate and senior instructor at Dubai Real Estate Institute.