Is it better to buy or rent in Abu Dhabi?

Rent or BuyAlmer Agmyren, Managing Director, Rex Real Estate

The Abu Dhabi residential property market has continued to spiral upwards due to the removal of the rental cap along with the return of government employees, who were living in other parts of the country, to the emirate.

In such a robust scenario, is it smarter to rent, or save up the bucks to buy your own house?

Almer Agmyren, Managing Director of Rex Real Estate, breaks down the situation.

Renewed buyer confidence

Throughout the year, the market has witnessed a continued rise in residential property rents, and values have stabilized.

The volume of sales has slowed as values have risen to a level where investment yields are not as high as before (but still above 5%).

In addition, there is only a limited amount of new stock coming into the market.

With the robust economic growth and subsequent rise in the number of jobs being created, the demand for residential properties will continue to rise, and this will translate into a number of new schemes being announced over the next few months.

Presently, there is a great interest in Saadiyat Island, and a few key developments on Reem Island and Raha Beach continue to experience steady demand.

A healthy level of new job starters relocating to the emirate to work in the energy/hydrocarbon, tourism, hospitality and education sectors over the past 18 months has helped boost the overall Abu Dhabi real estate market.

The removal of the rent cap has allowed landlords to increase rents on properties that were locked into a historically low rent.

Without the rent cap, if demand begins to outweigh supply, there is a danger that rents could suddenly inflate, pushing the general cost of living upwards. And this is no good news to tenants.

As such, the positive factors for investors to buy their home would be that the mortgage payment will be lower or right below the current rent amount. And they need not worry about rent hikes.

Buying versus renting

Buying an apartment is generally better than renting given that the mortgage payments are lower or at par with the current rental prices and that the term one is expected to own or stay in the house is more than two years. This allows for steady capital appreciation as well.

Generally, greater long-term job security for end-users adds confidence in planning a purchase.

The flipside is that the lack of job security and awareness of the price movements in the market can sometimes be a good argument for renting instead of buying.

Property prices can move both ways, and it is not an easy path to predict price movements and external shocks to the global economy.

Banking facilities that can be availed of

More and more banks are interested in financing real estate projects in Abu Dhabi, whether the development is under construction or not.

Many a time, it is worth asking a professional mortgage consultant regarding the nitty-gritty of having a property financed.

The consultant can usually recommend the right bank for any investors with their specific needs and requirements in mind.

For instance, Abu Dhabi Finance is offering interest rates at 2.99% with no application fees, no salary transfer required and an annual payment holiday.

Hidden costs buyers should be aware of

One of the best parts of real estate out here in the UAE is the straightforward transaction involved.

Generally, it is the price, the transfer fee to the developer and the commission to the real estate agency if bought in the secondary market.

In other countries, there are additional fees, various taxes and lawyers involved.

The costs that one should consider in addition to these may be service charges by different developments.

We always recommend that property investors read the fine print carefully if having a purchase financed.

The latest in capital’s real estate market

• According to the Jones Lang LaSalle report, the Abu Dhabi residential property sector has witnessed an increase of an average of 17 per cent in the first half of 2014

• There are about 240,000 units of residential property available, most of them being completed on Reem Island, Danet Abu Dhabi and Al Reef

• The Abu Dhabi market continues to boom with short-term demand being fuelled by investment and job growth, and government-backed projects. Major construction projects, such as the airport expansion, Etihad Rail and Saadiyat Island, have added to the positive boost

Source: Zenifer Khaleel, Special to Freehold


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