In Dubai, the real estate market is witnessing a significant shift as more residents, including businessman Najam-us-Saqib, make the transition from renting to owning property. Najam took the smart step of purchasing a small apartment in a more affordable area outside the city and opted to rent it out. Meanwhile, he chose to live in Al Qusais, a location close to his children’s schools and workplace, where he now rents another apartment.
This shift to homeownership has proven beneficial for Najam, allowing him to save on rental expenses while also witnessing the appreciation of his property’s value over time. The demand for housing in Dubai remains high, driven in part by an inflow of rich people shifting to the city in recent years.
While foreign buyers have been prominent in the property market, a growing number of local residents are now joining the ranks of property buyers. Various factors contribute to this trend, including the appeal of ready-to-move-in homes, the potential for higher investment returns, and the cost savings achieved by owning rather than renting. Additionally, Dubai’s growing population and increased salaries are also attracting residents to invest in real estate.
Rizwan Sajan, the chairman and founder of Danube Properties, a major private developer, believes that Dubai’s real estate market is experiencing an exhilarating phase for developers and investors. Unlike the earlier crash in 2008-09, the current trend is driven by genuine end-users who are keen on purchasing properties for either residential living or rental purposes.
Imran Farooq, the CEO of Samana Developers, highlights the numerous advantages of transitioning from renting to homeownership. By owning a home, individuals no longer need to pay rent and can instead focus on mortgage payments. Moreover, becoming a homeowner presents an opportunity to become a landlord, enabling them to rent out their properties for investment returns. This opens the door to owning multiple properties, affording them the chance to generate rental income from their real estate assets. The current scenario in Dubai’s real estate market holds great promise for those looking to invest in their own properties and benefit from the steady rise in demand from genuine end-users.
The increasing trend of tenants in the UAE becoming buyers can be attributed to several key factors –
Growing Population
Dubai’s population is witnessing steady growth, with more than 50,000 people added this year, bringing the total count to 3.612 million. The city attracts not only high-net-worth individuals but also professionals seeking better opportunities and a promising future. The influx of expatriates has led to a surge in the need for rental apartments, consequences in increasing rents. In response, long-time residents are now considering the option of purchasing freehold properties as a more stable and financially rewarding alternative to renting.
The UAE welcomed 5,200 millionaires in 2022, the highest number worldwide. This year, it is projected to draw another 4,500 high-net-worth individuals, making it the second-highest formation globally. The presence of such affluent individuals in the country contributes to the rising demand for real estate, as they seek to invest in possessions as a means of ensuring their economic future.
New launches mean more opportunities
The real estate market in the UAE is witnessing a surge in new project launches, offering more options to potential buyers and tenants alike. Developers, recognizing the high demand, are actively introducing new projects to meet the growing needs of the market.
A prominent example is Danube Properties, known for its rapid growth, which has unveiled 9 assignments in the previous 18 months, with an average of two projects launched per month. This reflects the enthusiasm among developers to capitalize on the current demand for properties.
As per a report by Asteco for the first quarter of 2023, an estimated 32,000 residential properties, comprising both villas and apartments, are set to be conveyed over in Dubai this year. This suggests a steady supply of new housing units to accommodate the enhancing need. These newly launched projects offer a wide range of options for tenants who are considering the transition to homeownership and also present opportunities for them to become landlords by renting out their properties for investment purposes.
A Grown Market
The Dubai property market has evolved into a more mature phase, and tenants are recognizing this positive transformation. With increased regulations and laws compared to the past crisis in 2008-09, tenants now feel more assured that their units will be delivered as promised, protecting their investments.
Unlike the 2008-09 crisis, where investors faced losses due to credit crunch and project delays, the recent pandemic crisis showcased a different scenario. While some slight delays occurred due to pandemic restrictions, projects are largely progressing according to schedule, providing tenants with greater confidence in the market’s stability.
Obtainability of ready-to-move-in properties
The abundance of ready-to-move-in properties in Dubai has become a compelling factor for tenants to consider transitioning from renting to owning. This option enables them to redirect their monthly rental expenses into equated monthly installments (EMI) towards their own property.
Renowned developers like Damac Properties and Danube Properties are leveraging this trend by delivering appealing sales, comprising mortgages of up to 85% of the property’s worth and low monthly prices beginning at Dh3,600 per month. This process has achieved favor as it permits tenants to become homeowners while maintaining manageable monthly costs.
Increased Rents
Dubai’s soaring rental rates, with a remarkable 22.8% surge in average rents and 16.9% growth in property prices as reported by CBRE, have prompted tenants to seriously contemplate buying their own properties. Particularly, those with long-term residency plans, including golden or silver visa holders, are considering homeownership. The allure of rising property values is attracting Asians, who are selling assets in their home countries to relocate to Dubai.
With rental prices on the rise, Imran Farooq, CEO of Samana Developers, notes that many Dubai residents are now considering buying property to avoid facing unfavorable rent increases from landlords. Even people with middling earnings are analyzing co-ownership options. This movement is launched to persist for the next two years, fueled by Dubai’s recent economic prosperity.
Increasing Salaries
Amid the post-pandemic economic recovery in the UAE, there has been a notable surge in demand for skilled professionals, leading companies to respond by offering higher salaries and allowances. A prime instance is the Emirates Group, which raised compensations for its vast workforce following a record profit in 2022-23. With improved earnings, residents have been able to save significantly, spurring them to explore better investment opportunities.
As banks offer relatively lower recoveries on savings approximated to potential gains from property investments, many residents are opting to fund in real estate. Instead of depositing funds with banks for interest, they prefer buying and renting out apartments or using them for personal living. The belief in favorable returns from property investments has made real estate an appealing option for residents looking to grow their wealth and capitalize on their increased income.
Also Read: UAE Poised to Lead as Top GCC Economic Performer in 2024