What do you need to know before buying property in Dubai?

Buyer's Guide: Facts we need to know before buying a property in Dubai.

Whether you are a first-time buyer or a seasoned investor, buying a home can be both an exciting and challenging time. We list the most important factors to consider before becoming a homeowner in Dubai.

If you are considering making the decision to switch from being a tenant to a homeowner, this could be one of the big steps you will be taking in your life - both financially and emotionally, especially if this is the first home you are buying. to ensure this process is both, rewarding and as smooth as possible, we have outlined the most important factors to consider to kick-start your journey and make it enjoyable and stress-free.

What to consider?

• Tenure
• Affordability
• Upfront fees
• Maintenance costs

Additional things to consider:

• Location
• Size
• Layout
• Quality
• Market conditions

Costs of long-term renting versus buying your own home

To rent or buy? The age-old question. The answer is often highly personal and depends on your individual financial situation.

Consider the below example.
Example: Renting Vs Buying: A 1-bedroom apartment in Downtown Dubai

The average rent for a 1-bedroom apartment in Downtown Dubai is AED 90,000 per annum, while the average sales price is AED 1,200,000 – let’s look at the numbers for both over the same 5-year time period.

Buying a 1-bedroom apartment in Downtown Dubai

Purchase Price	AED 1,200,000
A down payment of 25%	AED 300,000
Principal amount	AED 900,000
Buying fees	AED 92,840
Agent fees	AED 25,200
Land department fees	AED 48,580
Registration trustee fee	AED 4,200
Mortgage valuation fee	AED 3,150
Mortgage processing fee	AED 9,450
Mortgage registration fee	AED 2,260
Knowledge fee	AED 10
Monthly mortgage payment	AED 4,628
Total buying costs over 5 years	AED 370,560

Renting a 1-bedroom apartment in Downtown Dubai

Monthly rent	AED 7,500
Agent commission	AED 4,725
Ejari fee	AED 195
Total rental cost over 5 years	AED 455,700

The above calculations reveal that buying is 19% cheaper than renting longer-term.

The comparison shows on average, renting costs AED 7,595 per month vs owning a property which costs AED 6,176 per month.

Building equity, building wealth

Sure, the upfront costs of buying exceed the amount of your first 12 months’ rent cheque. However, over time, this gap flattens. The main difference? With each monthly mortgage repayment, you are moving closer to owning your own home. Whereas, with each monthly rental payment, the harsh reality is, that you are effectively paying someone else’s mortgage. 

In addition to reducing your mortgage over time, long-term retention of your property should see you witness capital appreciation. Capital appreciation is the increase in the market value of your property against the purchase price. The longer you hold the property, the greater the chances of it increasing in value, boosting your overall equity.

Becoming a homeowner is a huge milestone that requires thinking beyond simply just your down payment. When considering investing in the real estate market, it is important to assess your long-term commitment to Dubai, analyze your rent vs buy costs inclusive of all hidden fees and charges, and do your due diligence.