Why expat residents prefer to rent than own in UAE
Despite staying in the UAE for over five years, a majority of expatriate residents have not purchased properties, citing lack of affordability and higher down payment.
A propertyfinder.com survey found that only 30 per cent of residents had bought property in the country, while the remaining 70 per cent were still renting.
This is contrary to more developed and established parts of the world such as the United Kingdom, specifically England and Wales, where the figures are the exact reverse, with 64 per cent owning and only 36 per cent renting.
So why are residents choosing to pay rent?
Sixty-nine per cent surveyed said prices were “too high” and they couldn’t raise the necessary deposit or were unable to qualify for the loan amount required to borrow despite property enquiries being the highest since 2014.
The UAE mortgage cap regulations stipulate property buyers pay a minimum of a 25 per cent deposit for properties under Dh5 million and 35 per cent above Dh5 million. This is the single biggest obstacle for those hoping to get into the market.
For example, to buy a ready unit of Dh1 million, a resident will have to shell out Dh250,000; pay Dh40,000 to Dubai Land Department for title deed registration, Dh4,000 to registration trustee, Dh1,875 as mortgage registration fee and 2 per cent agent commission of Dh20,000; totalling Dh315,875.
On off-plan purchases, the bank offers only 50 per cent finance, which means the buyer will have to pay the 50 per cent till handover and then apply for a home loan. As of now, only a few banks offer home finance to residents with salaries as low as Dh10,000 per month.
Lukman Hajje, Propertyfinder Group Chief Commercial Officer, said: “It is clear that the want is there, but the high deposit requirements, fees, mortgage cap and stringent lending policies are stopping the market from maturing like its Western counterparts, and if we can overcome these points – I can really see a bright future for the UAE property transaction market.’’
Emirates 24|7 reported that investment in the Dubai real estate market rose by a whopping 92 per cent in April and May combined, taking total investment in the sector to Dh48 billion in the first five months of 2016.
Statistics have not been released on the number of expatriate residents that have invested in the property market though the number of foreign nationalities investing in the sector are over 127.
Last week, compareit4me.com, a finance comparison website, said that salary earners of between Dh8,000 and Dh19,999 per month were showing interest in owning properties in Dubai.
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