Property sales
UAE: Should I sell or rent my house out? Here’s how you decide Image Credit: Seyyed de Llata/Senior Designer

Dubai: The property market in the UAE has been on the mend since last year, with a growing appetite among buyers and investors driving a record number of real estate deals across the sector.

With property prices gradually rising in several areas you may have also been wondering whether it is an ideal time to sell or rent your house out in the current rebound-driven backdrop.

Although deciding on whether or not you should sell or rent your property out depends largely on your own circumstances, there are a number of pros and cons you should consider:

Four housing indicators that will help you decide between renting and selling your house

Selling or renting your home is a big commitment. So it’s beneficial to assess the housing market since it could make a huge impact on your final decision.

Let’s review four housing indicators that property experts use to evaluate a housing market, which are recommended also to help you think through your options.

1. Housing supply

Housing supply is, simply put, the number of unoccupied properties in your area. The pricing of a home is heavily influenced by the housing supply.

You can figure out when a large amount of people are moving to an area when the housing supply decreases. When this happens the average price of homes in that area will rise due to the increased competition.

In contrast, if the housing supply is high, it’s an indication that homeowners are leaving the area. This will cause the average price of homes to drop.

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Four housing indicators that will help you decide between renting and selling your house

2. Home prices

Home prices reveal the average selling price of a home. The price doesn’t affect affordability, it only indicates how home values have moved over some time. Higher home prices can be beneficial for homeowners whether they want to rent or sell.

It’s possible to raise the rent when home prices are high in your area, given that the low availability of homes doesn’t meet the demand of people relocating to the area. More than likely, you will also be able to receive a higher final selling price for your house when home prices in your location are booming.

3. Home sales

Home sales data tells you how fast people purchase homes in a particular area, in other words, how much competition there is. If home sales are plunging, it signifies that there’s increased competition for properties in that area.

Due to the high competition, negotiating with the seller may be unlikely since other buyers could be willing to pay the price to get their hands on the property.

On the other hand, if home sales drop, you have entered a buyer’s market. This means you have less competition to purchase and more flexibility to negotiate with sellers.

4. Rental affordability

Rental affordability indicates whether a typical rental household has enough income to qualify to rent a home or apartment. Typically, a tenant will spend 30 per cent of their income on rent. Therefore, if a tenant spends less than 30 per cent of their income on rent, then rent affordability is considered high.

If rent affordability is low in a certain area, property owners will likely attract renter applicants because they might not have the funds to purchase a home. However, for those same reasons, you may have trouble finding a suitable tenant.

When rent affordability is high, it may be beneficial to sell your house, as those who were thinking of renting might realise it is financially feasible to own a home.

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Rental affordability indicates whether a typical rental household has enough income to qualify to rent a home or apartment.

Advantages: What are the perks of renting versus selling a house?

There are benefits to both renting out your home and selling your home. Between earning a one-time lump sum or consistent cash flow, the options can be very rewarding.

• Perks of renting

Becoming a landlord has its main perk of creating passive income, but it can also be rewarding making decisions about a property you own.

If you don't want to maintain the property yourself, you have the option of hiring a property manager to give your more freedom.

Some bonuses of being a landlord include building equity, maintaining positive cash flow, covering your mortgage with rental income and diversifying your assets.

• Perks of selling

If becoming a landlord sounds too stressful, selling your home might be the best choice. If you decide to go with this option, it can potentially help you get prepared for purchasing your next property.

Other advantages of this option include converting assets into liquid cash, the fact you’ll have enough money for a down payment.

You can also stay clear of the responsibilities or the cash required to be a landlord or property manager and most importantly take advantage of a seller’s market.

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What are the downsides of renting versus selling your house?

Disadvantages: What are the downsides of renting versus selling your house?

Understand that there are downsides to both renting out your home and selling it. Selling your property means that you no longer have access to appreciation in property values and becoming a landlord could feel like a full-time job. Here are some other points to consider:

• Downsides of renting

Although rental properties create passive income for homeowners, it’s far from being a hands-off investment.

Some of the disadvantages of renting your home include the total time investment, dealing with maintenance issues, dealing with renters and insurance and not having enough funds to cover vacancies and evictions.

• Downsides of selling

Often, homeowners think that they can sell their home in an instant, but the process may not go as planned.

Some of the disadvantages of selling your home include closing costs, real estate commission fees, home improvement costs and home staging costs.

Frequently Asked Questions (FAQs)

FAQ #1: I’m moving abroad. Should I rent or sell my house?

If you’re moving to another country, deciding whether to sell or rent out your home will largely depend on whether you plan to return in the future.

If you plan to return, renting out your property will mean you have a home to come back to. Also, you could earn a good income from renting out your home while you’re away.

If you plan to return, you’ll benefit from any cash growth and you could have an agent manage your property for you while you’re abroad, meaning great peace of mind.

If you’re moving abroad for good selling your home could give you a nice lump sum to start your new life in another country. Also, you won’t have to worry about your property’s condition from afar.

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I’m moving abroad. Should I rent or sell my house?

FAQ #2: My house isn’t selling. Should I just rent it out instead?

A property that just won’t sell can be immensely frustrating, and it’s usually at this point many sellers consider whether renting out their home is a better option.

Before deciding whether to rent out your home, or keep it on the market, you should consider whether you need the equity in your home to buy your next property, if you can afford to take on two mortgages or whether you’re ready to be a landlord and deal with the responsibilities that come with being one.

FAQ #3: I’m buying a property with my partner. Should we sell our home or rent them out?

If you’re buying with a partner and you both own homes already, you have great options. You could rent out one of your properties and sell the other, which may provide you with enough cash to buy your new home and generate a nice income at the same time.

Or you could sell both of your properties and either buy a bigger home with your deposit or borrow less money through a mortgage. Finally, you could rent out both of your properties and enjoy the income that comes with doing this.

However, you’ll also need to consider how many mortgages you want to take on and whether you can afford to own two or three properties. Also, consider the extra responsibility of owning rental properties and being landlords as well.

Key takeaways

If you’re a homeowner who wants to part ways with your current property, you have a couple choices: selling or renting it out.

It’s a major decision based on your finances and possible income. So, which one is the better option? Evaluating whether to sell or rent your home can be difficult.

However, the above housing indicators can help you make an informed decision. If you decide to become a landlord, you could build equity and save money. Selling your home can give you access to a large amount of money that can go toward another property.