Dubai-based businessman Najam-us-Saqib bought a studio apartment in one of the affordable areas on the outskirts of Dubai. He has rented it out and now he is staying in the Al Qusais area in a rented apartment. He has opted for this choice because his children’s schools and his office are nearby.
Najam is among thousands of residents who turned tenants into owners, saving not only thousands of dirhams on rent but also seeing capital appreciation due to high demand amidst the increasing population, especially the inflow of millionaires in the past two years.
Dubai’s property market has witnessed unprecedented demand, driven by both residents as well as foreigners. Though, foreigners are said to be dominating the sales, residents are increasingly turning from tenants to buyers, attracted by various factors such as ready-to-move-in properties, higher returns on investments, savings on rents, increased population and higher salaries.
“These are very exciting times for developers and investors in Dubai because confidence is very high. Unlike the 2008-09 boom, this time investors and residents are not flippers but end-users – who either want to buy and rent it out or want to stay here,” says Rizwan Sajan, chairman and founder of Danube Properties, a leading private developer.
Transitioning from renting an apartment to owning a home has numerous advantages – eliminating the necessity of paying rent, occupants become landlords themselves, and homeowners can invest in multiple properties that they can afford and rent them out for investment purposes, says CEO of Samana Developers Imran Farooq.
Khaleej Times explores major factors why tenants in UAE are increasingly turning buyers:
Dubai’s population is continuing to grow, reaching 3.612 million in August, up more than 50,000 this year. In addition to many high-net-worth individuals relocating to the emirate, many professionals have also moved to the country, looking for greener pastures. In 2022, the UAE attracted 5,200 millionaires, the highest in the world. This year, the Emirates is projected to attract another 4,500 high-net-worth individuals, the second highest in the world. This strong inflow of expatriates is resulting in increased demand for apartments, hence, rising rents are prompting long-time residents to increasingly look towards buying freehold properties.
In order to cash in on strong demand, developers are increasingly launching new projects. For example, Danube Properties, the UAE’s fastest-growing developer launched 9 projects in the past 18 months, which translates to one project launch every two months.
Real estate consultancy Asteco said in its first-quarter 2023 report that over 32,000 residential properties in Dubai, including villas and apartments, will be handed over this year, reflecting a stable supply of new units to meet growing demand. These new launches are offering more options to tenants to become landlords themselves.
With more laws and regulations in place than in 2008-09, tenants are now aware that the local property market is more mature. They’re confident that their units will be delivered on time and their hard-earned money will not be lost.
During 2008-09, investors burnt their fingers as developers were not able to complete projects due to credit crunch. But this was not the case in the latest crisis of the pandemic. Though there could be slight delays due to pandemic restrictions, however, projects are going as scheduled.
“Government has tightened the rules for developers, also. It’s not that any developer can announce and start the project. There is a certain amount of bank guarantee which needs to be paid to the Land Department. The developer has to produce a bank guarantee before starts selling the project. Secondly, buyers’ money is going into the Escrow account. And there is a property audit happening by the Land Department. So the Department is on top of all the developers to ensure that money collected by developers from investors goes into an Escrow account,” says Rizwan Sajan.
With many ready-to-move-in properties available in Dubai, tenants are preferring to buy those and move in rather than live in the rented properties. This option allows tenants to convert their monthly rents into equated monthly instalments (EMI). The major developers such as Damac Properties and Danube Properties have been aggressively marketing to cash in on the trend with tenants being offered up to 85 per cent of mortgage and monthly payment of as low as Dh3,600 per month.
Also, properties in Dubai are much cheaper than its peers in Europe, Asia and the US. Prime property prices in Dubai are cheaper by 20 per cent to 80 per cent when compared to major cities such as Monaco, Hong Kong, New York, London, Geneva, Paris, Beijing, Tokyo etc., according to Knight Frank’s Wealth Report. Around $1 million can fetch 105 square metres in Dubai as compared to 17 sqm in Monaco, 21 sqm in Hong Kong, 33 sqm in New York, 34 sqm in London, 43 sqm in Paris and 60 sqm in Tokyo. Importantly, the return on investment is up to 12 per cent, which is another major attraction for residents to convert from tenants to buyers.
Average rents in Dubai, according to real estate consultancy CBRE, increased by 22.8 per cent in the year to June 2023 while average prices grew at the strongest pace since late 2014, increasing by 16.9 per cent in the year through June 2023. The rising rents are prompting tenants, especially those who intend to stay in the country for a long time and are in possession of retirement, golden and silver visas, increasingly top to buy. They are also tempted by the rising prices. In fact, brokers and developers say that many Asians are selling assets in their home countries and relocating to Dubai.
As rental prices continue to escalate, Imran Farooq, CEO of Samana Developers, says numerous Dubai residents are contemplating purchasing a property to circumvent the unfavourable rent increases imposed by landlords. “Even individuals with modest incomes are now looking into the possibilities of co-owning the property. I anticipate that this trend will continue for the next two years, given the recent economic boon in Dubai,” says Samana CEO.
Demand for talent grew exceptionally in the UAE in the post-pandemic economic recovery phase. In order to retain the best talent, companies increased salaries. For instance, Emirates Group increased salaries and allowances of its 100,000-plus employees after record profit in 2022-23. This has led to good savings for residents and look for better investment opportunities. With banks offering lower returns than property investment, residents have been opting to buy and rent, or live, in the apartments than depositing funds with banks to earn interest.
Article Source: www.msn.com