Making the leap from leasing to UAE home owner
As the UAE property market becomes more affordable – What do you need to consider before investing in a home here?
The UAE is often heralded as one of the world’s most affluent countries, but due to the high percentage of expat residents and falling rent prices, many residents choose to rent over purchasing a home.
However, the UAE is evolving away from a transient lifestyle destination to a place more and more people are looking to lay roots, and recent news stories suggest purchasing your own property in the UAE is worth considering. A recent study by Knight Frank, showed that prime residential properties in Dubai, for example, are more economical than other major urban destinations including New York, London, Hong Kong, Paris, Geneva, Tokyo and Mumbai, amongst others. The report disclosed that $1 million can buy 138 square meters of prime residential property in Dubai as compared to other global centers such as New York, London and Singapore where only a fifth of the space can be purchased in the same amount.
As the country becomes more economical for investment than most global centres around the world, the UAE looks to encourage longer-term investment from expatriates, offering increasing incentives to buy property than continue to rent. The building of “Affordable housing”, aimed at white collar mid-income workers, has also been increasing steadily in the UAE’s two biggest real estate markets, Abu Dhabi and Dubai. Nearly half of realty transactions in the UAE were priced at less than Dh1 million last year – meaning the country is looking to make property buying here a reality for the masses.
If you are considering purchasing property here in the UAE, here are the top 5 things you should consider, according to ADCB:
If you have decided to invest, you need to first ask yourself if you are buying to live or to rent out. If you are buying for investment, then it will be worthwhile to consider a property that will bring you high returns in the future.
Pick a property that fits your pocket
You can finance up to 80% of the property value. A mortgage finance, with a down payment suiting your budget should be considered while investing in property. If you are buying to live, the same theory of financing applies, but instead of paying rent, you would now be paying towards your mortgage, becoming a tenant of yourself.
Other factors that play an important role in determining whether you should buy on cash or mortgage is age, profession and savings.
Location and Size of the Property:
Whether you are buying to live or to rent, price and return on investment (ROI) is dependent on the location and size of the property.
Every property has its own specialty and can be termed as a good investment. As per a recent survey by bayut.com, in Abu Dhabi, Maryah Island is the current favorite location for investment followed by Al Raha Beach, Al Reem Island, Saadiyat Island and finally Yas Island. In Dubai, Dubai Marina tops the list of the most popular areas to invest followed by Palm Jumeirah, Arabian Ranches, Jumeirah Village Circle and Dubai Land.
Find a good developer / real estate agent:
A real estate agent should be more than a broker, who is able to share a rapport with you and understands your requirements. Make sure you have ticked the following when selecting the right developer or real estate agent:
Have you done a quick internet search on them to check for reviews?
Ask family and friends if they know the agent and have heard of the developer?
When you meet the agent, treat it as an interview where you enquire about their experience, sales history, licensing number and ask for references.
Make sure to visit the developer or real estate agent’s physical office.
Check if your selected agent has good relations with other agents to show you available properties under them?
Once you have decided on which property you are buying, the following up-front costs will be involved:
Down payment – deposits as per agreement of sale between buyer & seller
Land department transfer fees (who may also charge admin. Fees)
Connection fees for the electricity and water authorities
Property Maintenance charges
Mortgage application fees, if required
Commission to the broker.
Kaizar Patla, Head – Consumer Assets at ADCB said: “UAE is the land of dreams for many. It is a global hub for trade and finance that offers good quality of living, safety and security, world class infrastructure, tax-free environment and global exposure to all. Investing in property is a big decision that involves long term financial planning, but it is definitely something to be considered for those looking to live here long-term or purchase for investment reason. The most important thing to consider before deciding on an investment is financial stability. The buyer should make sure they are able to commit to all up-front and back-end costs.”