Planning to get a home in Dubai? Wow! You are going to be living in one of the most vibrant cities in the world. The experience sounds exciting. Yet, there are some factors that you should take into consideration when making the decision to invest in real estate. The most important ones are tenure, affordability, upfront fees, maintenance costs, and rental yields. Have you thought about them all? If not, read our article and discover more about each, in addition to the points you need to pay attention to before you start buying.
Factors to Consider Before Buying a Home in Dubai
Once you decide on a location to buy a new home, remember one thing: You can never change it unless you relocate! Therefore, make sure that your house is located in an excellent location where you can enjoy your life.
Before you can even choose the location, it is very important to set your budget ready. Your budget will decide the location of your house and all the other coming factors.
Size and Style
Think about the short and long-term size needs, and the practicality of the floor plan! Make sure you choose a layout you are satisfied with. Choose a house that has a room with expansion. In this way, you can make renovations instead of buying a bigger house whenever needed.
Think about all kinds and types of amenities and make sure they are all excellent. Consider both indoor and outdoor amenities from the quality of furniture (if it is fully furnished), lighting fixtures, type of flooring, a garden, or a private pool.
Additional Points to Consider
Are you planning to stay in Dubai for a long time? Your answer is extremely important. If you are staying for long, you will get a higher return on investment. If not, it could be better for you to rent a house instead.
Before you decide to buy a house, make sure to do some maths. The monthly expenses of your housing should not exceed 30 % of your salary. Moreover, you need to prepare for upfront fees which will approximately 7-8% of the purchase price and maintenance fees.
Upfront fees can be estimated at about 7-8 % of the price you are going to pay. The extra fees that you’ll be paying when buying the property, will include the 4% of the purchase price + AED 580 admin fee as Dubai Land Department Fees. For properties valued below AED 500,000, there will be AED 2,000 + 5% VAT you’re going to pay as Property Registration Fees and for properties valued above AED 500,000, you’ll pay AED 4,000 + 5% VAT. Plus you have to pay 2% of the purchase price + 5% VAT as Real Estate Agent Fees. If you’ve taken a mortgage, you’re liable to pay 1% of the loan amount + 5% VAT as Bank Mortgage Arrangement Fees plus 0.25% of the loan amount + AED 290 as DLD Mortgage Registration Fees. And finally, based on the valuation of the property you’ll be asked to pay between AED 2,500 – AED 3,500 + 5% VAT as Property Valuation Fees.
You need to pay annual maintenance for your property to the Dubai Land Department (DLD). The maintenance charges depend on the RERA service charge and maintenance index. This index determines a specific charge per square foot and varies by community.
Would you like to make money out of your house in the long term? If you are thinking about renting it later, and if there is a mortgage on the property, it is highly important to see whether the rental income you will be getting is sufficient to cover your monthly mortgage repayment and maintenance expenses as well.
To Buy or Rent a House
Of course, choosing whether to rent or buy a house is all up to your decision and circumstances. Yet, there are important points to put in mind when making the comparison. It is true that the upfront fees for buying a house exceed the amount of your first 12 months’ rent cheque. Yet, with each monthly mortgage repayment of buying a house, you become one step closer to owning your own home. Moreover, the longer you hold your property, the higher the capital appreciation will be. Capital appreciation is the increase in the market value of your property against the purchase price.
The average price of buying vs renting a home in Downtown Dubai
The average price for a one-bedroom apartment in Downtown Dubai is about AED 1,200,000 with a down payment of about AED 300,000. And the rental price for the same apartment will be 90,000 per annum. Of course, the price goes up when you choose a bigger house. But if you compare the monthly payments for the apartment over the course of 5 years, buying the apartment will be 19% cheaper than renting the apartment.
In our article, we have listed and explained some important factors that you need to take into consideration when buying a house in Dubai. Those are not the only ones. Some other factors include your saving, It is important because a personal loan from a local bank cannot be used to finance your down payment — this must come from your own savings.
Have you thought of all these factors? Are there other factors that we have not mentioned? Share your ideas with us in the comment section down below.