Should expats rent or buy property in Dubai?

A 2019 update on which communities you should rent or buy property in, given the current market scenario & a 5-year plan

31 Mar 2019, words by Aneesha Rai in The Market

Rent or buy property in Dubai

For long-term residents of Dubai, more often than not, purchasing a property may have crossed their minds more than once. In which case, is it better to purchase to buy or rent a property? There are a couple of factors to keep in mind while you're on the fence:

1) Do you have atleast 25% of your desired property value in cash as well as an additional 8% of the property value to pay in various fees such as registration charges?

2) Do you have an estimation of how long you'll be in Dubai? 

3) Are you aware of the service charges per year for your desired property?

If your answer to the first question is yes, & you are planning to live atleast 5 years in Dubai, then in most cases, it makes sense to purchase property rather than rent it. There are other factors to consider as well, including convenience and what you want to do with the property, ie. would you want to rent it or live in it. Here, I've broken down some of the average property prices in the prime areas in Dubai, complete with rental yields, & whether it's currently cheaper to buy or rent in the area. To do this, I had to operate on some assumptions & bases for calculation- 

1) The period for ROI is estimated 5 years

2) An estimated 25% liquid cash available on the property, with the rest mortgaged for 25 years.

3) Based on the current listing prices for both sales & rentals at Luxhabitat as we want to compare apples to apples because we focus a lot on the quality of the properties. 

4) Charges applied for DLD registration fees, mortgage fees (including valuation, processing & registration), agent fee, registration trustee fees, knowledge fees.

5) Doesn't include yearly service charges.

6) The increase in rental rates is not taken into consideration.

7) Gross investment yields are as per Property Monitor

8) The property is assumed to be used for end-use, not investment

Off-plan properties are not taken into the mix, as it is pretty hard to estimate rental yields. I've only taken freehold areas into consideration for this study. Long-Term investments of more than 10 years is ideal for long-term capital appreciation gains.

Al Barari

Upgraded Bromellia 26,548 square feet in Al Barari

Villa in Bromellia

6 bedrooms

Unavailable

The Al Barari area is a family-oriented community, perfect for living in a green sanctuary. It was primarily known for its villas, however recently, they have released apartments too. The average villa here costs about AED 13 million. The average rent is AED 525,000 per year, as per Luxhabitat data. 

Recommendation: Renting over 5 years is comparatively 33% cheaper than buying a property in Al Barari.

Arabian Ranches

Arabian Ranches is another really popular family-friendly community of villas. The project has been so successful, that two new phases have already been launched. The average villa costs AED 8.4 million, whereas a rental would set you back AED 505,000 per year. 

Recommendation: You could go either way. Arabian Ranches has reached an equilibrium point. Safe to keep in mind that you will actually own the property if you choose to purchase and will end up benefiting in the long run. 

Gross investment yield: 5.37% p.a.

Business Bay

Business Bay is in an ideal location, next to Downtown & financial centre areas. it's popular amongst families & young corporate professionals. The average luxury apartment costs AED 8.3 million, & average rental prices are AED 612,500. 

Recommendation: Buying a property in Business Bay is 18% cheaper than renting.

Gross investment yield: 5.79% p.a.

DIFC

DIFC is the perfect location for young corporate professionals. The average luxury apartment costs AED 8.3 million, & average rental prices are AED 241,375 per year. 

Recommendation: Renting is 50% cheaper than buying a property in the DIFC area.

Gross investment yield: 5.79% p.a.

Downtown Dubai

Termed the centre of now, Downtown Dubai is a wonderful, pet-friendly area for young families & corporate professionals. The average luxury apartment costs AED 9.2 million, & average rental prices are AED 386,047 per year. 

Recommendation: Renting is 30% cheaper than buying a property in the Downtown area.

Gross investment yield: 5.40% p.a.

Dubai Marina

Dubai Marina offers waterfront living and is a firm favourite amongst young families & corporate professionals due to its proximity & convenience. The average luxury apartment costs AED 11.2 million , & average rental prices are AED 454,280 per year. 

Recommendation: Renting is 32% cheaper than buying a property in the Dubai Marina area.

Gross investment yield: 5.82% p.a.

Emirates Hills

Emirates Hills offers residences for the creme de la creme next to the golf course & lake. The average luxury apartment costs AED 41.5 million, & average rental prices are AED 1.2 million per year. 

Recommendation: Renting is 52% cheaper than buying a property in Emirates Hills

Gross investment yield: 6.64% p.a.

Jumeirah Beach Residence (JBR)

JBR offers lovely beachfront apartments to its residents, who are mostly young couples and families that love to spend time by the sea. The average luxury apartment costs AED 5.6 million, & average rental prices are AED 237,000 per year. 

Recommendation: Renting is currently 29% cheaper than buying a property in JBR

Gross investment yield: 5.87% p.a.

Jumeirah Golf Estates (JGE)

Home to the DP World Tour, JGE is a stunning development with a gorgeous selection of golf-side villas. Of late, there are apartments being introduced to the mix, which makes it an attractive place of residence for couples and corporate professionals. The average luxury villa costs AED 9.1 million, & average rental prices are AED 314,000 per year. 

Recommendation: Renting is currently 42% cheaper than buying a property in JGE.

Gross investment yield: 4.58% p.a.

Jumeirah Islands

Jumeirah Islands is a tranquil area not far away from the hustle & bustle of the city. It's very family friendly and has a great community club where all residents tend to meet & socialise. The average luxury villa costs AED 10 million, & average rental prices are AED 475,000 per year. 

Recommendation: Renting is currently 21% cheaper than buying a property in JGE.

Gross investment yield: 3.81% p.a.

Jumeirah Lake Towers (JLT)

An extremely popular area, complete with restaurants, cafes, parks & lakes, Jumeirah Lake Towers is very famous amongst young working professionals & families. The average luxury apartment costs AED 3.7 million, & average rental prices are AED 130,000 per year. 

Recommendation: Renting is currently 42% cheaper than buying a property in JLT

Gross investment yield: 7.55% p.a.

Jumeirah Village Circle (JVC)

Extremely affordable, JVC is an area that offers close proximity to Al Khail road. It is still a developing community.  The average apartment costs AED 3.3 million, & average rental prices are AED 80,000 per year. 

Recommendation: Renting is currently 60% cheaper than buying a property in JVC. Great option for investors.

Gross investment yield: 7.69% p.a.

Meadows

A mature area, Meadows one of the most popular family-friendly communities, complete with supermarkets, groceries, parks & walkways. A typical villa will sell at an average of AED 7 million, and will rent for an average of AED 295,000.

Recommendation: Renting is currently 30% cheaper than buying a property in The Meadows.

Gross investment yield: 6.64% p.a.

Palm Jumeirah

Palm Jumeirah is considered the eighth wonder of the world & a firm favorite amongst expats in Dubai. The average villa costs AED 32.2 million, & average rental prices are AED 1,000,000 per year. The average apartment costs AED 4.5 million & the average rental rates are AED 238,000 per year.

Recommendation: Renting a villa on the Palm is currently 48% cheaper than buying a property. Renting an apartment on the Palm is 12% cheaper than buying a property.

Gross investment yield: 4.51% p.a.