UAE: Expats opt to buy property than pay rent
July 27th, 2008 Indo Asian News ServiceSunday, July 27, 2008 (Dubai)
An increasing number of residents in the United Arab Emirates (UAE) – especially expatriates – are opting to buy property rather than live in rented property because of soaring rents.
"Given the steady increase in UAE rental prices over the past few years, buying is appearing increasingly attractive to expats who are looking to build equity from the significant financial investment they are already making in their home," Chris Dommett, chief executive of leading independent mortgage advisor John Charcol Dubai, said in a statement in Dubai.
Indians, at 1.5 million, form the largest expatriate community in the UAE.
"The era of pumping hard earned income into oblivion for rent is dissipating within Dubai's expat community as educational awareness of the local mortgage market increases and home lending services become more accessible," Dommett said.
Building equity is widely considered the most important financial advantage of buying a home, said the statement.
"The ability of locking in a fixed monthly payment for a long term period is also a major incentive as rent in Dubai in general increases markedly every year," it said.
Recent reports showed the UAE's capital Abu Dhabi overtaking the country's commercial capital Dubai in property prices.
According to figures released by HSBC this month, the average rent per square metre in Abu Dhabi, which was $272 in the last quarter of 2007, rocketed to $430 per square metre in the second quarter of 2008, a rise of 58 percent.
In Dubai, average rent per square metre was $343 in the last quarter of 2007. But this rose 22 percent to $420 per square metre.
As for buying a house, in Abu Dhabi prices rose by 61 percent from the last quarter of 2007 to the second quarter of 2008, while Dubai witnessed a rise of 37 percent in the same period.
"The main reason prices in Abu Dhabi are outpacing Dubai is because the market is much tighter and delivery delays are more apparent," Majid Alam, an analyst at HSBC, told the Gulf News.
"Ultimately, we believe that Abu Dhabi should be at a premium because affordability is higher," he added.
According to John Charcol, the volume and variety of mortgage options in the market, coupled with low interest rates, are also enticing a growing number of expatriates to tap into the region's booming real estate industry and invest in their own property.
"Depending upon the price of the property and its expected return as opposed to what they are paying in rent, for many buying is often times a more economic solution," it said in the statement.
However, it added, despite these advantages, "many foreigners continue to rent at exorbitant prices, in part due to a lack of understanding of the local real estate market, but also out of hesitation to get involved in the seemingly daunting UAE property buying process".