If you’re an expat or an investor considering Dubai’s real estate market, you’ve probably asked yourself: “Should I rent or buy?” “What are the long-term benefits of renting vs buying?” “Which is cheaper in the long run
These are all valid questions and we, as real estate experts, hear them all the time. If you’re also confused about what decision to make, keep reading. In this blog, we’re going to consider Renting vs Buying property in Dubai from different aspects and you can figure out which works best for you.
Why is Dubai a Prime Destination for Renting & Buying Properties?
At Star 5 Realty, we’ve been working for over a decade in Dubai’s most luxurious localities. So far, one fact has been made crystal clear: Dubai is where your investment works for you.
Dubai has a world-renowned reputation as a global business hub. Positioned at the crossroads of Europe, Asia, and Africa, this city naturally attracts entrepreneurs, investors, and professionals of all backgrounds. The demand here is organic, so the market continues to thrive.
Beyond the stunning skyscrapers and luxury communities, what excites us most is the economic stability of the region. We’ve seen markets in other distinguished parts of the world swing unpredictability, creating a challenge for investors but here? Dubai’s diverse economy, powered by tourism, technology, trade, retail, and Real Estate, keeps things steady.
With that in mind, deciding whether to rent or buy property in Dubai isn’t as straightforward as it seems. It’s not a one-size-fits-all decision and what works for one person might not work for another, so we’re going to break it all down one by one. You decide which choice is the wisest for your goals.
What Are Your Long-Term Plans?
Before embarking on the nitty-gritty of your mental debate, take a step back and answer this: Where do you see yourself in the next five, ten, or twenty years?
If you’re planning a stay for the foreseeable future- maybe building a career, growing a business, or settling down with family, buying a property in Dubai is naturally a smarter move. It gives you stability, helps you build equity, and lets you take advantage of Dubai’s growing property market. With no capital gains tax and higher rental yields, owning a property lets you build up on your wealth.
On the contrary, if you’re in Dubai for a temporary assignment or you’re unsure about your long-term plans, renting is wiser because it will allow you to test the waters here. You can explore the market, and different neighborhoods, adjust to lifestyle changes, and avoid the upfront costs of buying a property which is a financial commitment on its own.
Consider Costs. What’s Cheaper in The Long Run?
When it comes to the cost of renting and buying in Dubai, It’s important to consider how the numbers align with your personal financial goals.
According to recent market reports, the average rent for a luxury one-bedroom apartment in big neighborhoods like Dubai Marina, Downtown Dubai ranges between AED 70,000 to AED 100,000 Annually. So, over the next five years, you’re looking at a total rental expense between AED 350,000 to AED 500,000. While you will have flexibility, this money is essentially spent without building any ownership or equity.
On the other hand, buying a property comes with significant upfront costs. For instance, for a property investment in Dubai, you’ll typically need to pay 20-25% of the property’s value as a down payment. The average price for a one-bedroom apartment in Dubai’s Luxury neighborhoods can range anywhere between AED 1.2M to AED 2.5M so that down payment could cost you anywhere between AED 240,000 to AED 625,000. Plus, covering additional costs like registration, maintenance, and mortgage adds up to another AED 10,000 monthly.
However, the good news is that these payments are contributing to building your assets over time. Property prices generally appreciate by around 5-10% per year, so owning a property yields substantial returns in the long run, especially if you decide to sell or rent it out.
Considering more numbers. Over the next five years, if you pay AED 5000 per month on a mortgage, that’s AED 300,000– but in that time, your property value could increase by 5-10%. So, you might see a capital gain of AED 60,000-AED 120,000 depending on the market. Plus, let’s not forget about rental yields, which in Dubai’s high-demand areas is 5-7% annually, providing passive income.
So for the long term, buying is more cost-effective.
Flexibility & Freedom
Dubai is a city of change. According to recent numbers, the average expat lives in Dubai for 3-5 years. One of the biggest draws of renting a property in Dubai is the freedom and flexibility it offers, and this can be incredibly important for many people living here– you might want to move to a different neighborhood, upgrade to a larger space, or even relocate elsewhere after a couple of years. Renting makes that easy.
Renting helps you downsize or upsize without the hassle of selling a property. On the other hand, purchasing a property is a commitment with additional costs and time involved in repairs, maintenance, and general upkeep. Buying a property is a stable option but renting is more flexible.
Legal & Visa Benefits: Does Owning a Property in Dubai Give You an Edge?
Yes, buying a property in Dubai does indeed come with certain legal advantages, especially when it comes to residency and visas. Owning a property here shows a long-term commitment to the city which is often seen as an additional benefit when applying for employment-based visas or business licenses.
According to Dubai property laws, If you buy a property worth AED 2 million or more, you may be eligible for a long-term residence visa (up to 10 years). Similarly, for an AED 1 million, your residence visa allows for 3 years of residency. This incentive helps foreign investors who’re in Dubai for an extended period and don’t want to renew their visa annually.
Plus, property owners can sponsor immediate family members like your spouse and children under the same visa which makes it easier for your family to relocate and settle here.
Which Option has a Better Investment Potential?
If you’re thinking beyond just living in Dubai and want to maximise returns, buying is a better investment choice. With owning a property, you get two major financial advantages
5-10% annual capital appreciation. If you buy a property of e.g AED 2 million, and it appreciates by 7% annually, its value could increase by AED 140,000 per year– a potential gain of AED 700,000 over 5 years.
The demand for luxury real estate in Dubai is consistently insane. Dubai leads the global luxury real estate market with the most property sales. In the first quarter of 2023, over 300 sales of properties valued above 10 million U.S. dollars took place in Dubai.
Substantial Rental yields. Dubai is one of the best cities globally for rental returns with 5-7% annual yields in prime areas. If you rent out a property worth AED 1.5M at 6% rental yield, you earn AED 90,000 annually which provides a solid passive income.
As per Statista,
- In Q1 2024, the average residential rental price in Dubai increased by 21% year-on-year.
- In Q1 2024, the average residential sale price in Dubai increased by 21% year-on-year.
Final Verdict?
Renting is a better alternative for individuals who need short term flexibility (3-5 years), who don’t want the financial commitment of property ownership or maintenance responsibilities.
Buying is a better option for people who plan a long stay for over 5 years, who want residency benefits, or who want to make the most of their property investments in Dubai.
If you’ve queries that go beyond the scope of this blog, please do not hesitate to personally get in touch with us at Star5 Realty Or contact us on +971 4 549 4200!
