Irrespective of where you stay or the kind of accommodation you have, we can all agree that rent is the single biggest expense each month for any expat resident in the UAE. For Dubai, experts say that at least 40 per cent of a resident's income goes into paying rent.
A one-bedroom apartment could cost anywhere from Dh50,000 to Dh90,000 per year as rent depending on where you stay. While rents have reportedly been falling across the country, these ranges still apply in most areas.
Is buying worth it? Yes, if you're planning to be in Dubai for a really long time - upwards of 15 years we would say. Most people in the UAE end up staying longer than they originally thought. So, unless you're only planning to stay less than 10 to 12 years, buying might be a great option for you.
Take our poll, would you rather buy or rent?
For the purpose of this comparison we are using a one-bedroom apartment near the Al Jafiliya area as a case study. For renting, we are using Dh65,000 as our sample price (based on the RERA Rental Increase Index) and Dh1.3 million as the sale price for our off-plan apartment.
|Booking deposit/Down payment||5,416||325,000||Rent: A month's rent; Down payment: 25 per cent of cost|
|Dubai Land Department (DLD) Fees for property transfer||-||52,000||Buying: 4 per cent of amount|
|Broker or agency fees||3,250||-||Rent: Up to 5 per cent of annual rent; Buying: 2 per cent of sale price if using an agency and none if buying from developer|
|Registration fees||-||4,000||Buying: registration fee is Dh4,000 for properties valued higher than Dh500,000|
|Valuation fee for mortgage||-||2,500||Buying: Valuation of the property for mortgage regulations by the bank|
|Oqood fees for off-plan sales||-||52,000||Buying: Only applicable for off-plan properties at 4 per cent rate on cost|
|Mortgage establishment fee (bank)||-||13,000||Buying: 1 per cent of cost price and could be anywhere from 0.25 to 1 per cent|
|DLD mortgage registration fee||3,540||Buying: DLD mortgage establishment at 0.25 per cent plus fees|
|Furnishing||15,000||15,000||A similar amount for both|
|Total||23,666||467,040||Down payment drives up this amount by a lot for buying property|
As you can see the initial spend for property purchase is almost 20 times that of a rental. However, most of it is down payment, which acts as initial equity for the asset that will be your home.
Yearly expenses for 20 years
The following are the yearly expenses for 20 years in each scenario. We are going to assume that the rent increases by 15 per cent after ten years (easier for calculation) and that payment of mortgage amount stays the same per year (which is the case usually.)
|Item||Amount in Dirhams||Notes|
|Annual maintenance||-||Dh300,000||DLD has set service charge indices for freehold areas; for now we assume it is Dh15 per square foot (for 1000sq.ft)|
|Annual Ejari fees||Dh3,900||-||Dh195 paid as Ejari fees to register your tenancy contract|
|Annual rent paid for 20 years||Dh2.14 million||-||Calculated as rent paid for 20 years with a 15 per cent increase after the first ten (accounts for increase/new shifts etc.)|
|Mortgage paid for 20 years||-||Dh1.3 million||Calculated as [Cost - Down Payment] + 3 per cent fixed interest rate|
|What you have at the end of 20 years||-||Your own property|
In 20 years, renting could cost you upwards of Dh2.16 million not including utility bills and other amenities. Buying a house spread over the same period of time could cost you upward of Dh1.76 million not taking into account other incidentals and utilities.
In comparison, everything you pay to buy is directly or indirectly towards something in your own name; unlike rent which is payment for a service with undeniable perks of stability, flexibility and no debt issues.
For buying: At the end of 20 years you end up paying less for buying overall even after the initial spend. Your average monthly rent is at a stable low of around Dh4,166. Not to mention that you would then be a proud owner of Dubai property, which could be sold or rented out to earn back all your investment with profits.
The 40 per cent you spend on living in Dubai comes back to you in another form. The loan doesn't require any collateral other than the property itself.
For renting: Owning property comes with the financial pressure of having to stay and work in the UAE until your mortgage is paid off. Unlike for your home country, this means having valid employment (and residency) to keep your monthly payments going. Selling your property is not as easy as you would think and this means you may not be able to leave at a moment's notice. The loan or mortgage uses the property as collateral, so in case you can't pay off the loan, the property goes to the bank.
Disclaimer: This is a guide only and uses approximate figures and current expense items for the comparison. Gulf News is not responsible for any new items of expense being added or changes in fees at any time. The costs and rents used are averages to illustrate the differences.