In their latest report International Monetary Fund experts presented a mathematical calculation, which clearly shows that buying an apartment in Dubai is now actually cheaper than renting a similar unit in the same city area.
Price-to-rent ratio in Dubai, according to the IMF, is gradually decreasing since the middle of 2014, indicating a healthy correction of the overheated and overpriced real estate market.
To calculate price-to-rent ratio you need to divide the selling price of the property by the price of its annual rent. And to assess the resulting value one can use a three-stage system, proposed by American experts from Trulia, a real estate marketplace, under which 1 to 15 ratio value means that buying a house is much more preferable than renting it, 16 to 20 ratio value — typically it’s better to rent than buy, and 21 or more ratio value means that renting an apartment or a house, or a villa is much better than buying it.
For example, the price-to-rent ratio for apartments in Discovery Gardens in Dubai averages to 10.76, for as the average selling price for apartments in this district equates to US $ 190,000, while the average rental price for the same apartment is US $ 17,650 per annum. In Business Bay and Jumeirah Lakes Towers price-to-rent ratio is 13.33 and 14.4 respectively.
At the same time IMF and Global Property Guide data of the gross rental yields in Dubai reveal that this indicator continues to rise since 2014, remaining among the highest in the world. Average gross rental yields in Dubai increased by 6% in six months and amount to 5% to 7.21% per annum.
However, property owners, scared with the softened tenants’ activity in Dubai rental market, started reducing rents recently, but the cost of the property is also reduced, so the IMF experts expect that price-to-rent ratio will stay pretty much the same.