As rents across Dubai have hit new highs, there has been an increase in the number of tenants moving into the buying market.
That trend is set to intensify over the course of this year as changes to the RERA Rental Index bring about steep rent renewals. The move toward property ownership is also being helped along by the decrease in mortgage rates this year, with a monthly mortgage payment looking much more attractive than a month’s rent.
As more people become first-time homebuyers in Dubai, there are a few points they will want to consider.
Plan for the future
I think it is really important that buyers understand their timelines when buying. By that I mean, how long are they planning to stay in that home? Some might have the idea that they are purchasing a ‘starter home’ for the next couple of years, at which point they will sell and upgrade to something better.
My advice would be to buy a property for the longer term, primarily because it helps to spread out your buying fees and other fixed costs over a longer period of time, creating less of a financial strain.
Also, you don’t want to position yourself where you might get caught up in a market cycle. It’s hard to say for certain how the market will look in 4- or 5 years. If there is a downturn – a big ‘if’, but one to be aware of – buyers who were intending to sell will find themselves in a panic. Buying for the long-term makes it easier to ride out market cycles and to eventually sell when the right opportunity arises.
Know your payment model
Mortgages are, for many first-time buyers, a complex subject and as a result, sometimes they opt for what appears to be the simplest solution. My most crucial piece of advice for anyone considering a mortgage is to make sure that your lifestyle allows you to keep financing it.
At present, your monthly mortgage payments may seem attractive, but six months down the line will you still be able to comfortably keep up with them? If you have any unexpected financial changes such as a job loss or a family emergency, will you still be able to stay on top of your payments?
I would also advice buyers to be conscious of the follow-on rates for their mortgages. When you sign up for a mortgage, you might have a low fixed rate for a certain time period, but what does it look like after the fixed term ends?
Speaking from personal experience, I enjoyed a very nice fixed term when I took out a mortgage many years ago. Once the term was up, my interest shot up to nearly four times the fixed rate. If you are planning to sell your home in the future, having to suddenly contend with a much higher mortgage rate could hinder the sales process.
Which areas will buyers flock to?
I think it’s a bit natural for tenants to look around their current community, or neighbouring communities, to find buying options that will allow them to enjoy the same lifestyle and the conveniences that they already have. Largely, the search for properties will be driven by a combination of availability and affordability.
Dubai’s residential footprint continues to expand outward, leading to more growth in far-flung areas like Mira Oasis and Damac Hills 2. The expansion and strengthening of road networks will also benefit several newer communities like Arabian Ranches 3 and Tilal Al Ghaf. The latter, which is already an extremely popular choice for buyers and investors, will experience a fair bit of growth this year.
Ultimately, I think the areas that are poised to grow are the ones where there is still value to be found, whether that is from improved infrastructure, or the possibility for individual enhancements.
Some people might choose to own a home for a year or two before they start renovating it and adding in upgrades that suit their lifestyle better. Properties and communities that can readily accommodate change will be the most coveted by new buyers.
Going from renting to buying is a huge leap to make, and one that can be as exciting as it is daunting. But with a bit of forethought and planning, I think today’s buyers may find themselves a home that they will be happy to call their own for many years to come.
