For long, Dubai’s property sector was dominated by the rental market. The advent of the free zone era — granting residents and overseas investors the opportunity to buy live-in homes — has been a game changer for the sector.
Despite nearly two decades of success achieved by the freehold era, there are many who still resort to renting, mostly out of misconceptions about the purchasing process, or driven by a misunderstanding of the true economics of owning a home in Dubai. As one of the most liveable cities, Dubai offers an ideal real estate investment environment leveraged for the benefit of not just a higher quality of living guaranteed by owned homes, but also for the economic sense it makes.
Though market analysts report that it is cheaper to buy a property in Dubai than renting out an apartment or villa, especially with the introduction of clear-cut legislations that guarantee and protect investor rights, expatriates continue to doubt whether to own a property. The fact is, when people rent, they are only helping pay off someone else’s mortgage when they very well can benefit from taking a decisive move and investing in property.
Let us look at some hard facts: renting out a property at Dh65,000 per year compared to buying a home in the same locality for about Dh1.3 million will translate to more gains for homebuyers in the long-run. The report states that while renting costs for 20 years amount to upwards of Dh2.16 million, excluding utility payments, buying a property in the same location would cost just over Dh1.76 million, not to forget that the investor then owns a lucrative asset after the 20-year period.
When investing in property, you save at every level. The “dead investment” of rental payments becomes history as you can effortlessly set aside a similar amount as a monthly mortgage — a mere expense turns into a profitable investment.
Once investors secure the initial down payment, which, with some payment plans can be as little as 0 per cent, investing in a home becomes a sensible decision. Moreover, investors can rent out their units to pocket a monthly revenue that covers the mortgage payments. We’ve done the math — when purchasing a studio and one-bedroom unit in Azizi Riviera, for example, the rental yield of the one-bedroom alone can cover the monthly mortgage payments for both units. Investors can thereby live rent-free for years, until the mortgages are paid off and the assets are theirs.
More people are realising the worth of investing in owned property, reflected in the growth in transactions — by number and value — as reported by Dubai Land Department (DLD), which recorded Dh66 billion of real estate transactions in the first 5 months of 2019 alone, signifying a 15 per cent increase to the same figures in 2018.
With clear policies in place, the current market condition is also conducive to make the shift to owned homes easier, with developers and financial institutions offering affordable and convenient payment plans to encourage more mid-income professionals to invest in rent-to-own (RTO) homes, an initiative that is gaining traction. In fact, the Land Department has launched a rent-to-own registration service to provide a clear legal structure for such homes, which includes rental and future sales agreements in the contracts.
In short, the benefits of investing in an owned home far outweigh the yearly drain to one’s budget into rents that add no value to one’s savings or the future. This is a fact, one that the public is growing increasingly aware of to the benefit of all market stakeholders ... but primarily to their own.
Farhad Azizi is CEO of Azizi Developments.