Whether it’s more cost-effective to rent or buy a property in Dubai, if you’re not sure for how long you’re gonna stay? A new online calculator gives a new solution to that old problem.
A July report by a property portal Bayut revealed that rentals in Dubai went down between 2 per cent and 9 per cent year-on-year. In the meantime, Dubai’s real estate sector slowed in the first six months of the current year, with transactions volume shrunk 16 per cent year-on-year, according to a July data released by the Dubai Land Department.
Thus, potential buyers in Dubai often want to calculate a breakdown and analysis of costs to know how much they can save in the long term if they buy, but banks usually don’t provide this kind of data. So you have to struggle to get all of this information and do the math. In this situation, how a tenant can decide, what option to choose — rent or buy? A new Rent vs Buy Calculator will help.
The Rent vs Buy Calculator was created by real estate platform Propertyfinder. It compares the total cost of renting with the total cost of buying real estate in Dubai. You can find out whether it is more cost-effective to buy or rent the same real estate unit by simply inputting such figures as the annual rent and the property’s purchase price, plus other expenses coming along with buying, and the number of years you plan to stay in Dubai.
The calculator then processes the data to provide you an estimated cost breakdown and analysis, with a certain break point where purchase becomes more affordable than tenancy.
Some buyers, experts say, may be surprised to find out that, over time, it is more cost-effective to pay a monthly mortgage than rent.
Let’s get it clear. Say, a tenant planning to stay in Dubai for five years is interested in renting a property for AED960,000 pa. He/she can easily weigh the cost-effectiveness of buying s similar property for, say, AED1.1 million. With an average mortgage interest rate of 3.75 per cent (a standard rate offered by most UAE banks) applied to a 25-year home loan, the monthly mortgage payment for such property will be about AED5672, while the monthly rental cost will be about AED8101. Thus, according to the calculator, paying mortgage for such kind of property is 30 per cent cheaper than renting it.
This calculation also factors in the 25 per cent deposit of AED275,000 to buy a property with the total cost of buying over five years coming in at AED340,320 versus the total rental cost of AED486,015. And the latter is the amount you’re going to just give away, while each mortgage payment brings you a step closer to owning your apartment or villa. In the end, it all depends on how long you’re going to stay in Dubai.
Mortgage calculators actually, aren’t new for the real estate industry, but a dual comparison application that outlines the cost of renting versus buying is a new concept. The costs involved explain residents what it actually costs them to make this kind of decision providing all the financial facts and the clearer vision of the whole situation.
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