Dubai – MENA Herald: Despite apartment and villa sale prices dropping steadily for 2 years, a recent survey of propertyfinder’s consumer audience found that just 30% of its UAE residents have bought property here, meaning a sizeable 70% of them are still renting, even though half have resided here for 5 years or more. This is contrary to more developed and established parts of the world such as the UK, specifically England and Wales, where the figures are the exact opposite, with 64% owning and only 36% renting.
Year on year we are seeing expats staying longer in the UAE, and with rental yields across the Emirate ranging from 6% to 10% for apartments, most people understand the cost of renting for 3 to 5 years could easily cover the deposit. Yet, 70% of our audience still rent. So why are residents choosing to pay excessive rent amounts and not opting to buy instead?
The main reason sited of the renting community for being opposed to purchasing their homes was affordability concerns. With a combined 69% answering that prices were too high, they couldn’t raise the necessary deposit or they were unable to qualify for the loan amount required to borrow.
The number of people staying in the country longer than planned is increasing. 54% ended staying longer than expected and property enquiries on the propertyfinder.ae are the highest they have been since 2014.
Lukman Hajje, propertyfinder Group CCO explains “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.’’
UAE property prices are considerably cheaper than in other leading cities in the world and have come down considerably since the peak of the last cycle back in mid 2014. Expats are staying longer but due to high deposits required, many who’d like to buy are being forced to rent.
Introduced in January 2014, Mortgage Cap regulations which stipulate expats needing a minimum of a 25% deposit for properties under AED5M and 35% above AED5M plus the doubling of the Dubai Land Department transfer fees to 4% no doubt helped us avoid another 2009 type of crash where prices fell by 50% to 60%, but 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%’ adverts quickly learn that the UAE lending policy stipulates a maximum lend of 50% on off-plan properties.
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 added, ‘’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.’’