Why UAE residents choose to rent housing over buying?
Stop renting, start owning, a tag line in a property ad in Dubai reads.
The UAE’s real estate markets have recently seen a push by the builders to promote the sale of their offerings in the various parts of the country. But a survey released on July 17 shows that majority of the country’s residents choose to rent housing rather than buying it.
Real estate portal Propertyfinder reveals that just 30 per cent of the residents have owned properties in the country while a staggering 70 per cent, half of whom have lived in the here for at least five years, continue to rent despite a steady drop in apartment and villa sale prices for past two years.
This is contrary to more developed markets elsewhere, such as England and Wales in the UK where 64 per cent own properties while only 36 per cent are renting.
So what does stop the UAE residents from buying properties?
The portal says that affordability concerns were cited by the most as the prime reason for not purchasing apartments or villas in the emirates.
With a combined 69 per cent answering that prices were too high, they could not raise the necessary deposit or they were unable to qualify for the loan amount required to borrow, says the survey.
“It is clear that the want is there, but the high deposit requirements, the fees, the mortgage cap and stringent lending policies, are what’s 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,’’ says Lukman Hajje, Gropu COO at Propertyfinder.
Property prices in the country are considerably cheaper when compared to other leading cities in the world and have come down considerably since the peak of the last cycle back in mid 2014.
It is also noteworthy that expats are increasingly choosing to stay longer in the emirates but the high deposit requirements bar them from buying properties.
Mortgage cap regulations, introduced in January 2014, require expats to pay a deposit of a minimum of 25 per cent of the total value for properties under AED5 million and 35 per cent for above AED5m. The Dubai Land Department has also doubled transfer fees to 4 per cent.
Propertyfinder says that these measures have helped the emirate avoid a property crash similar to the one in 2009 prices fell by at least half. But it argues that today in a market that has been cooling for 2 years, it remains the single biggest obstacle for those hoping to get into the market.
“Even off-plan purchasers being lured by attractive ‘book with just 10 per cent’ adverts quickly learn that the UAE lending policy stipulates a maximum lend of 50 per cent on off-plan properties,” says Hajje.
“There is no doubt that the stabilization of the market, from the effect of low crude oil prices and the subsequent strength of the US dollar, must be having an impact on people’s long term plans. Additionally, with the recent exciting developments – both commercially, in terms of business opportunities, and physically, with projects like the impressive Dubai Canal – staying and committing to life in the UAE is becoming even more of an enticing option.”
Hajje further said that ‘’the recent Brexit news will, I’m sure, mean that British expats will be even further enticed to stay put here in the UAE and will attract further of their fellow countrymen to the Emirates over the next five years to avoid the turmoil that many feel they will be subjected to.’’