Dubai tenants jump on property ladder as rents soar

October 21, 2022

Buying an apartment is now seen as a more attractive option than paying a landlord

Betterhomes reports sales transactions rose 61% year-on-year
End-user property buyers provide more market stability than investors
Rents increased due to demand for Expo Dubai and Qatar World Cup
Foreign buyers include Russians, Brits, Indians, Germans and French

Dubai has seen an increase in end-user homeowners as its property market matures and begins to move away from the speculators and flippers of the boom days before 2008.

Surging rental rates and expats opting to live in the UAE longer have also made the jump from tenant to homeowner increasingly more attractive, industry experts said.

Real estate firm Betterhomes reported that total sales transactions in Dubai rose 61 percent year-on-year, based on Dubai Land Department data.

A total of 22,895 unit sales worth AED52.39 billion ($14.26 billion) were recorded in Q3, with apartments accounting for nearly three-quarters of sales.

The report also showed that the demographics of buyers is changing, with 45 percent of sales going to end-users, compared to 36 percent in the previous quarter.

“Due to rising rental costs and changes in mindset, families and individuals with a long-term plan of living in the UAE are now opting to purchase a property rather than paying their landlord’s mortgage,” said Richard Waind, group managing director at Betterhomes.

Average rental rates on villas, townhouses and apartments rose 60 percent, 35 percent and 36 percent respectively year-on-year in the third quarter of 2022.

Tie, Accessories, Accessory — John Lyons, managing director of Espace Real Estate

John Lyons, managing director of Espace Real Estate, which has sold and leased properties across 54 Dubai communities since 2009, echoed this sentiment.

“We have experienced an increase in demand from end-users,” Lyons said. “This is a very healthy sign for the market as people buying property for personal use creates greater stability.

“Previous cycles in Dubai have seen high levels of demand from property speculators which can make the market unstable during a market downturn.

“Genuine end-user demand provides more market stability than speculative investor-led demand.”

The biggest group of foreign buyers in Q3 were Russians, followed by Brits, Indians, Germans and French.

Investors and end-users in Dubai property market. Source: Betterhomes

With investors still making up the majority of Dubai property buyers, private developer Damac Properties said it has seen a “steady climb” in buyers since the outbreak of the coronavirus pandemic in 2020.

“The UAE was one of the first nations to bounce back to business following the Covid restrictions and lockdown,” Niall McLoughlin, senior vice president at Damac Properties, said.

“The timely opening of the Expo 2020 Dubai further attracted investors to the UAE – a trend that continues to rise.

“Not only has this escalated foreign investment in the UAE real estate landscape, it has encouraged residents to buy homes instead of continuing to fall back on rental units.

“Residents get two birds with one stone: an investment in a lucrative real estate market as well as a home in a city they are happy to live and work in.”

Expats are opting to stay living in the UAE longer than the global average. The 2022 edition of the 360° Global Wellbeing Survey, compiled by health services firm Cigna in September, found that the average length expats stay in the UAE is about four years and five months compared to a global average of three years and three months.

Russians and Brits top the ranking of foreigners buying Dubai properties. Source: Betterhomes

The company attributed that figure to a “better quality of life, finances and a more stable job market” in the UAE.

Prince Ufuoma Eshalomi, director of sales at real estate firm Powerhouse Real Estate, said the rise in rental rates, as a result of increased demand due to the Expo 2020 Dubai and the upcoming FIFA World Cup, combined with longer expat stays, is convincing tenants to become buyers.

“People who had one-year agreements that are coming to an end are either renewing their agreements or buying properties and renting them out for the time being.

“My thoughts for the coming year are that people will now buy homes just to save on rent. There is a shortage in the market, there is no stock available in almost all the communities,” he said.

The growing end-user trend is also evident in other emirates.

“As values in the Dubai property market continue to rise, there has clearly been a knock-on effect in certain in-demand parts of Sharjah,” said Ahmed Alkhoshaibi, group CEO of Arada, one of the largest developers in neighbouring Sharjah.

“With regard to end users versus investors, our experience shows that Sharjah is a slightly different market to Dubai.

“When we first launched Arada back in 2017, our buyer mix was about 70 percent investors to 30 percent end-users.

“Since then we have seen the share of end-users grow significantly, particularly as we have handed over homes. Right now, we are seeing about 60 percent end-users to 40 percent investors.

“We attribute this ratio to the demand for quality homes in premium communities in Sharjah.

“It is convincing some buyers who may have originally seen their purchase as an investment to move in when they see the completed product.”