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More Dubai residents likely to buy homes instead of renting: Report

It notes that the average rent prices for apartments rose by around 25 per cent in 2022 compared to 2021, while villa rents increased by 26 per cent

More Dubai residents are likely to switch to buying homes instead of renting them, a market report has suggested.

"Consumer buying behaviours were found to be rapidly evolving towards more long-term investments, with tenants preferring ownership over rental properties, driven by the surge in average market value by 25 per cent," real estate marketplace Property Finder said as it released its latest Annual Market Watch.

The report found that the number of rental contracts witnessed a slight decrease of 5 per cent last year.

“With rental values rising in the last year, and at an all-time premium in certain areas, owning a home has become a more viable option for residents,” said Madhav Dhar, co-founder, and COO of ZāZEN Properties.

“Whether it's to live in or rent out, the opportunity to earn strong rental income or achieve capital appreciation in Dubai is higher than in most other globally recognized cities.”

The report notes that the average rent prices for apartments rose by around 25 per cent in 2022 compared to 2021, while villa rents increased by 26 per cent.

Dubai's rental market has changed over the last few years. The prices of properties have increased dramatically due to the increase in the expat population as well as an increase in the construction costs. In addition to this, the interest rate has increased by around 3.4 per cent in 2022 to 4.4 per cent in December. The price of properties is expected to increase more in the future. This has spurred a potential shift in preference of Dubai residents from renting to buying their own homes.

“We have noticed that some of our clients who approach us for renting eventually buy when they realize they can easily put their rental money into mortgage payments,” said Shabna Ibrahim from A1 properties.

As per the report, Dubai is going to continue to ride the high wave in 2023. Scott Bond, UAE country manager at Property Finder said: “As we step into 2023, we are noticing spikes in demand thanks to the huge progress achieved in 2022, especially during the last quarter with big ticket transactions taking place and a heightened flow of foreign investment. We see a bigger, better, and brighter outlook for 2023.”

Reasons to invest

According to experts, there are several reasons why people prefer to buy in Dubai. Jeff Kuruvilla, sales manager of Positive Properties, says one is the ease of the process. “Buying has become easier than ever before,” he said. “Developers give 1 per cent payment plan, DLD waiver and some even offer post-handover payment plan. If buyers can spare 20 per cent of the money for a down payment, they can get financing for the remaining 80 per cent from the bank depending on eligibility.”

Dubai’s reputation as a safe place to invest in has caused another phenomenon- an influx of new foreign investors setting up a base in Dubai, especially high-net-worth individuals (HNWIs).

“For these new educated and well-travelled buyers, Dubai real estate has become a desirable investment due to the country’s world-class infrastructure, top-tier facilities, business friendly environment and simple residency program,” said Madhav. “As a result, people are increasingly looking to make Dubai their primary residence. This has helped drive up the requirement for high quality homes across the emirate.”

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Luxury Market booming

The report states that the results of Dubai’s bullish real estate market can be seen in the luxury units. While apartment values have increased by almost 9 per cent, villa prices have recorded almost an 18 per cent growth. All market peaks were broken in the fourth quarter of 2022.

According to Shabna the luxury market has been booming especially with the influx of the HNWIs population. “We have seen huge activity in that market,” she said. “Cash buying in the UAE is one of the highest in developing countries in the world.”

However, she admits that sale in the mid-market has slowed down due to the increasing interest rates. “People are now watching the interest rates and seeing where it will go,” she said. “So, the market for houses within the 3 million brackets has slowed down ever so slightly.”

The Property Market report revealed that Business Bay, Downtown Dubai, Dubai Marina, Jumeirah Village Circle (JVC) and Palm Jumeirah were the top preferred choices for those searching to own an apartment, while Arabian Ranches, Arabian Ranches 2, Arabian Ranches 3, Dubai Hills Estate and Palm Jumeirah were popular hits for investment or residence purposes in the villa category for 2022.