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Setting Up House: To Rent or to Buy?
- A period of stability seems to have been reached after years of volatile housing prices.
- There is a lot more to the choice between renting and buying than comparing monthly mortgage payments to monthly rent.
Perks such as housing allowances and high salaries for expats in the UAE have decreased with the passing financial crisis of 2008, putting a strain on those renting or buying property. It is definitely a good idea to get a clear idea of what exactly your company offers in terms of allowances before you decide on accommodation.
Moreover, as land is such a sought-after commodity in the UAE, the profit margin on luxury properties is much larger than on properties better suited for middle-income expats, shrinking the market for affordable housing.
Buying Property in the UAE — Worth the Risk?
Dubai and Abu Dhabi
Buying freehold property — as opposed to leased property — was made possible for expats in Dubai by the Ruler’s Freehold Decree in 2002. Keep in mind that this decree outlines specific areas within Dubai where the ruling applies, most of them being in New Dubai. For Abu Dhabi a similar law was passed in 2005 for designated areas called "investment zones".
When you start looking into buying property in Dubai, the Dubai Land Department is a good source of up-to-date information and contains (approved) contract templates for buyers as well as sellers. Its Abu Dhabi counterpart can be found on the municipality’s eGovernment Gateway.
Sharjah and Ras Al Khaimah
Alternatively, expats working in Dubai can buy property in the Sharjah emirate. With significantly lower housing costs and a minimal commute, this location is ideal for expats working in Dubai and looking to buy a house in the UAE. The Real Estate Registration Directorate has many helpful tools for buying property in Sharjah.
Marjan Island and Al Hamra Village are the designated areas in Ras Al Khaimah where foreigners can buy real estate. Expats can hardly complain as both offer luxury accommodation by the coast. Check out Ras Al Khaimah’s Real Estate Regulatory Authority for details regarding your purchase.
The Other Three Emirates — Ajman, Umm Al Quwain, and Fujairah
Development projects are popping up left and right in Ajman. Emirates City is one to keep an eye out for, with Lavender Tower and Paradise Lakes Towers being the latest high-rise accommodation developments. Ajman’s Real Estate Regulatory Agency is an online portal offering useful services for potential property owners. With its own international airport underway, Ajman might be a good place for a long-term investment.
Umm Al Quwain borders Sharjah and is only about 40 km away from Dubai. Although developers are eager to negotiate more options for property ownership, as of 2006 expats are allowed to own property but not land, leaving mostly floors in apartment buildings up for grabs. A further stipulation is that the property must be situated in one of the designated areas.
Fujairah retains a very conservative approach to foreigners owning property, restricting them to the Fujairah Freezone, which in turn caters more to businesses rather than individuals.
Taking Out a Mortgage — Stick To the Rules
In 2013, the Central Bank of the UAE imposed new regulations when it comes to mortgages for expatriates buying property in the UAE:
- If you are a first time buyer and buy a property valued at less than five million AED, you must come up with at least 25% of the asking price yourself. If it exceeds this sum, the percentage that lies with the expat goes up to 35%.
- For any additional properties bought, the expat must account for 40% of the asking price, leaving 60% to be taken out as a loan from the bank.
- The maximum amount for any loan is seven times your annual income.
- The loan can be repaid over a maximum period of 25 years before the borrower reaches the age of 65.
Investors Welcome! Visas through Property
One aspect of home ownership which has changed in favor of expats is the visa regulation connected to owning property. A new visa category has been introduced, extending residency privileges from several months to several years.
You have two options when it comes to visas tied to your property deed. You can either get a multiple-entry visa — also called a (property) investor visa or a property holder’s visa — valid for six months, or you can get a residence permit valid for three years. Keep in mind that neither one of these options includes a work permit.
For the multiple-entry visa, you first have to enter the UAE on a visit visa and then head to your respective immigration office — this is also a good place to get the most up-to-date information on the process as the UAE is very fast moving and regulations may differ between emirates. To be eligible for this type of visa, you, as well as your property, need to meet the following criteria:
- The property must be complete — ready for you to move in.
- The property needs to be worth over one million AED.
- The name on the title deed needs to be the same as that on the residency visa.
- This person must have a monthly income of at least 10,000 AED.
The visa holder in question can sponsor their spouse and children for their multiple-entry visa. This visa is valid for six months at a time and can be immediately renewed from abroad.
Alternatively, property owners in the UAE can get a residence permit valid for three years. This legislation was introduced in 2011. Criteria for eligibility are similar to those for the multiple-entry visa, but you should definitely check with the immigration services of your respective emirate.
Are You a Tenant Rather Than a Home Owner?
The highest percentage of expats, in particular those not looking to make a long-term investment, are found in the emirates of Dubai and Abu Dhabi. On top of this, the governments of these two emirates provide more services related to house hunting. The focus of this section will therefore be on these two emirates.
As in the case of opening their property market up to foreign buyers, Dubai is ahead of Abu Dhabi when it comes to rental regulations. The Land Department offers a Rental Increase Calculator to see whether the rent on your property is reasonable and by how much it is allowed to increase. Tenants in Abu Dhabi are worse off in this respect as the municipality has in fact removed the previous five percent rental cap and has yet to introduce a similar index as the one in Dubai.
Further measures to regulate the renting of accommodation include the Rental Dispute Center in Dubai and the Rent Dispute Settlement Committee in Abu Dhabi: they deal with any serious disagreements between landlords and tenants. Renting in Dubai also means paying the Dubai Municipality housing fee — five percent of the annual rent — on top of rent. The Dubai Electricity and Water Authority adds the housing fee to your monthly utility bills. Abu Dhabi, on the other hand, does not have such an additional fee.
Searching for Your Dream Home
If you’re looking in the Dubai emirate, check out the government’s list of properties for sale on their online platform. Make use of the Real Estate Regulatory Agency set up by the Dubai government informing prospective home owners and tenants of what to expect in terms of contracts and rents. Unfortunately, prospective tenants in Abu Dhabi don’t have access to any similar government services.
Other than that, newspapers such as Gulf News and Emirates 24/7 can provide you with some listings. Naturally, real estate agents will have their own website. Here are some popular real estate agencies and property websites in the UAE:
Standard agent fees are between two percent and five percent of the amount involved in the transaction for buyers, the latter being rather steep. However, five percent of the annual rent is a standard fee if you use a real estate agent to find rental property. In Dubai, make sure to ask your real estate agent for their RERA card. Ras Al-Khaimah’s real estate authority is working on implementing a similar registration service.
If you have yet to decide on a specific emirate and want to be thrifty when it comes to your choice of accommodation, be it rented or bought, use online comparison tools to check up on such details as rent to price ratios and mortgages as a percentage of income across the UAE.
We do our best to keep this article up to date. However, we cannot guarantee that the information provided is always current or complete.