The ‘rent vs buy?’ question is more relevant today than ever before as property prices are more stable
According to Cluttons Middle East market activity in studio, one, two and three-bedroom apartments, valued at a price point below AED 1.5 million, is the most active segment. In their opinion, it currently makes more financial sense for hopeful end-users who wish to offset the cost of rent to buy at these levels.
Richard Paul, Head of Professional Services for Cluttons Middle East, said: “At this price point one and two-bedroom apartments in an established area are dominating most of the activity in the market.
“This is also the case for prospective owner occupiers who wish to cease paying rent. It does depend on where the individual sits financially, but if they have adequate equity, it makes sense for them to contemplate paying off their own mortgage and look at real estate as a mid and long-term investment.”
Cluttons said their advice can also be applied to expatriate families looking to break-even on rent and invest in multiple assets in Dubai.
“For a family that has money to invest, we would also advise to stick below AED1.5 million price point, which represents the most stable market segment currently,” added Paul.
“At this price point, even if the decision is to lease the property investment out, post-acquisition, a purchaser should expect a 7-9% gross yield in some areas and subsequently after interest payment, service charges and upkeep, there is still good profit rent to be achieved.”
Craig Plumb, Head of Research at JLL MENA, said: “The majority of expatriates in the UAE have traditionally sought to rent rather than purchase properties. As the market has become more mature (with less price volatility than in previous cycles), expatriates can be more confident to buy at close to the bottom of the current cycle to benefit from potential long term capital growth. Recent changes to Visa laws (allowing 10 year residency for certain groups of expatriates is also likely to increase demand to purchase property in the UAE for their own occupation.
“The case for purchasing properties is further strengthened by the attractive payment plans that are currently being offered by developers that are keen to dispose of unsold off plan units and the increased choice of low-to-mid market product available for sale.”
The article was originally published in the Cityscape Global Show Newspaper