Renting vs buying – This is a never-ending debate for many! And for countless Dubai residents, the dilemma is even bigger, given the significant rises in house rents and unpredictable movement in property prices.
The Souqalmal team takes a look at the current property prices and rents for one bedroom apartments in a popular location in Dubai, to analyze the cost of buying vs renting. For the sake of simplifying the comparison between buying and renting a one bedroom apartment in Dubai, let us use a popular mid-priced community in the city like Business Bay, as an example. These calculations do not take into consideration any price appreciation or annual rent increases.
Scenario I – Buying a one bedroom apartment
If you chose to buy a one bedroom completed apartment in Dubai on mortgage, this is what you’ll have to shell out in one-time up-front costs, as well as in EMIs and maintenance costs spread over a period of seven years:
| Cost of buying | (in AED) |
| Price for a 1-bedroom apartment in Business Bay* | 1,300,000 |
| Down payment (25%) | 325,000 |
| Dubai Land Department fee (4% of property price) | 52,000 |
| Broker’s fee (2% of property price) | 26,000 |
| Mortgage processing fee (1% of loan amount) | 9,750 |
| Average mortgage valuation fee (varies across banks) | 2,500 |
| Mortgage registration fee (0.25% of loan amount) | 2,440 |
| Total up-front cost | 417,690 |
| Mortgage value (75% LTV) | 975,000 |
| EMI for a loan tenure of 25 years @ 3.99% p.a. (variable)** | 5,140 |
| Total EMI payments x 7 years | 431,760 |
| Annual house maintenance charges (AED 13,500) x 7 years *** | 94,500 |
| Total cost of buying spread over 7 years (EMI & maintenance) | 526,260 |
* Average price based on listings on Property Finder
** Variable rate based on average interest rates for home loans listed on Souqalmal.com
*** Average charges based on RERA service charge index, AED 15 per sq ft in Business Bay, assuming you buy a 900 sq ft apartment
[Related: The real cost of buying property in the UAE]
Scenario II – Renting a one bedroom apartment
Now, if you chose to rent the same house, your total outlay over seven years would look like this:
| Cost of renting | (in AED) |
| Annual rent for a 1-bedroom apartment in Business Bay* | 90,000 |
| Annual rent x 7 years | 630,000 |
| One-time broker’s fee (5% of annual rent) | 4,500 |
| Annual Ejari registration fee (AED 195) x 7 years | 1,365 |
| Total cost of renting over 7 years | 635,865 |
* Average rent based on RERA rent index
So, should you buy or rent?
The up-front cost of buying the apartment is AED 417,690, which is quite high. However, it is also important to note that you have created equity worth 25 percent of the property value, right at the start.
Aside from the up-front cost of buying, you would spend AED 526,260 in home loan installments and property maintenance charges over seven years, which is around 15-20 percent lower than what you would pay in rent and associated fees over the same period, i.e., AED 635,865.
But is number-crunching the only way to decide between buying and renting? Not really. Your decision must take into account your personal financial circumstances and lifestyle preferences. Take into consideration factors like your budget, affordability, how long you plan on staying in Dubai, other debt obligations and such, before you dive head first into either.