Is it Better to Buy or Rent in Dubai? Rent vs Buy Calculator Can Help You Decide
Trying to figure out “should I buy or rent” in Dubai? A lot of people think renting is just throwing money away, especially when a mortgage can cost about the same each month. And if you check online for a “rent vs buy calculator” or “renting calculator”, you may discover that owning rather than renting can be a strategic financial move.
Should I Buy or Rent? Let’s take a look.
Renting offers flexibility – you can move easily and don’t have to worry about property upkeep. On the flip side, owning a property can provide stability, capital appreciation when the property goes up, and potential for long-term financial gain.
There are no one-size-fits-all answer, but here are 5 key questions you can ask yourself before going into the “Is it better to buy or rent?” debate.
1. How long do you intend to live in Dubai?
If you rent for decades, you can potentially end up paying more than if you were to buy a property. This is because rent typically increases while a fixed-rate mortgage payment reminds the same.
So, if you plan to call Dubai home for the long run, buying may be worth considering.
But how do you figure out exactly for how long? Here’s how to do the math.
Use a “Rent vs Buy Calculator“
Property Finder has a pretty great Rent vs Buy Calculator to help you figure out the right timeframe and understand how both renting and buying will impact you financially.
We particularly like this Rent vs Buy Calculator as it factors in the length of stay, the upfront fees of buying a property in Dubai, and how much you will save if you rent versus buy.
Input your “length of stay” and play around with it. When the renting amount becomes pricier than the buying amount, that’s the timeframe you should consider to buy in Dubai.
But do note, this Rent versus Buy Calculator does not include service charges, property insurance, valuation fee, maintenance expenses, life insurance (mortgage requirement) etc. It’s typically 7-8% of the property value.
You will need to factor these in your calculations (see post here on all extra costs), and see if which one makes better sense financially for your time frame.
2. If you decide to leave Dubai, are you going to sell or rent it out?
Obviously, you do not want to sell your property when the market is going down or at the bottom of the market cycle.
But are you prepared to go through a downtime where your property value may be lower than your purchase value and when you cannot sell?
When deciding if it’s better to buy or rent in Dubai, there’s another crucial angle to consider: being a landlord. And if you do happen to rent it out, can your potential rental income cover mortgage payments, maintenance bills, service charges, and any surprise costs?
If it doesn’t, do you have enough extra funds to cover for them?
3. Do you have enough liquidity in case your circumstance change?
Are you putting all of your liquid funds into a down payment?
Are you 100% confident you can handle those mortgage payments month after month, for the entire life of the loan?
Buying a home comes with a lot of upfront expenses, and it will take years for you to break even.
You don’t want your money to be tied up, or be forced to sell and make a loss.
4. Are you okay to change your lifestyle?
Buying may be cheaper than renting, but it all comes down to where you’re buying and what kind of property you’re eyeing.
Take Downtown Dubai, for instance – it’s probably cheaper to rent than to buy.
But, for those wondering if it’s better to buy or rent, buying could be the cheaper option if you’re eyeing up-and-coming areas or off-plan properties in Dubai.
Keep in mind, this may also mean longer commutes, a less prestige location, and fewer dining options compared to more established areas.
If you’re open to a little lifestyle change, these alternative can be more cost-effective than renting.
5. Are you comfortable carrying a mortgage, or do you prefer a debt-free life?
Debt is much more than just money and can have huge effects on us psychologically.
If you are constantly worried about job security and paying off your bills, it is natural to feel worried and stressed about how you will be able to pay them off.
Having a greater peace of mind knowing you are debt-free is something you cannot buy.
Final Thought
Oftentimes, many investors decide to buy based on the notion that “owning is always better.” But, as with every financial decision, there will always be an opportunity cost.
Buying a home gives you ownership, privacy and equity, but you will have to take care of repairs, maintenance costs, and service charges which can be time-consuming and costly.
Renting is less capital intensive, less maintenance, and more flexible, but you may have to deal with rent increases, moving out, or a difficult landlord.
“Should I buy or rent?” isn’t a once-in-a-lifetime decision. If you can’t afford to buy one yet, honestly, that’s okay! You can always revisit the question, plug in those numbers again in the Rent vs Buy Calculator at any time if you experience lifestyle or financial changes.
