Buying property in Dubai makes good sense for residents

The uncertainty in global financial markets and a concern about the effect of inflation on the economy of the UAE should not deter local residents from buying property if they plan to live in Dubai for longer than a couple of years. And for anybody with a five-year time horizon this decision is a no-brainer, and they will be kicking themselves at the end of that period if buying a home has not been a part of their own expatriate package.

But it has to be said buying a home is a medium term financial commitment that does not suit everyone. If you do not have the cash – and few younger expatriate buyers will be in that position – then you need a stable job of sufficient salary to qualify for a mortgage.

Indeed, qualifying for a mortgage is one way that buyers who should not be buyers are taken out of the market before they get into it. And the criteria applied to borrowers in Dubai are often a lot tighter than the marketing brochures and websites suggest.

So if you make it through the mortgage application process then likely as not you are a suitable candidate for home ownership. But at the same time you should naturally make your own realistic assessment of your financial and personal circumstances.

Buy for long term

Buying a home should never be seen as a short term punt. Borrowing to make a short term investment is seldom a good idea, as you might then have to sell at just the wrong moment and could take a loss or almost certainly be disappointed in the outcome.

However, if you want to live in Dubai for several years, and many long term residents were once those who intended to stay for a year or two, then you need to sit down and work out how much you will pay in rent versus how much you will pay out for a mortgage.

Then there is the more difficult issue of capital gain or loss to consider. Over time, house prices are determined by three major factors: inflation, location and supply.

Inflation

Anybody living in Dubai knows that local inflation is high and shows no sign of slowing down. That means that your rental costs tend to increase with time and that exerts a powerful upward force on house prices.

Secondly, location in terms of buying in a city like Dubai with a booming economy, long term development plan and house prices below other comparable hub cities due to the newness of the market, is a major consideration. You also need to think in terms of which neighborhood locations offer the best long term potential.

Thirdly, supply is a tricky issue to resolve as the demand from incoming new residents to Dubai remains huge, while the delivery of projects is behind this curve. At some point this supply may overwhelm the market but there would be proactive management by the government to support prices.

No investment can be guaranteed to be a good one but long term investment in property around the world has been a consistent winner and it should be no different in Dubai.