Eviction Notices Spark Property Buying in Dubai

Eviction notices from landlords are prompting some to invest in their own real estate.

The Dubai real estate market is increasingly evolving, with property ownership becoming more popular among renters. Due to significant rental price hikes and eviction notices, many are deciding to purchase their own apartments or villas instead of renting further. According to a recent report, nearly 30 percent of clients who took out mortgages last year were motivated by receiving eviction notices from their landlords. Rather than seeking a new rental, they opted for buying as a more profitable long-term solution.

Eviction Notices and Rising Rents

In Dubai, owners are entitled to send eviction notices to tenants if they wish to sell the property or use it themselves. According to the 2024 Mortgage Finder Report, a significant portion of renters chose to buy a property due to rising rental rates. The report states that 29 percent of buyers were driven by receiving eviction notices, often because the owner sold the property.

The report highlights that due to the substantial increase in rental costs, purchasing a property appeared safer and financially beneficial for many. Approximately 65 percent of buyers also expressed having long-term plans in the United Arab Emirates (UAE), which further influenced their decision.

Why Buying in Dubai is Worth It

The report suggests that buying comes with unique economic benefits in Dubai. While the average mortgage interest rate is about 4 percent, rental yields exceed 6 percent. This means monthly mortgage payments are often lower than equivalent rental costs, allowing buyers to build their own equity instead of paying rising rents. Besides stable financing options, buying constitutes not only an emotional decision but also a long-term financial strategy.

According to the Mortgage Finder Report, 74 percent of mortgage borrowers are first-time property buyers, while the remaining 26 percent purchase for investment purposes. The report emphasizes that the majority of borrowers (41 percent) have an income between 30,000 and 60,000 dirhams per month, while 26 percent earn up to 30,000 dirhams. More than half of the buyers (53 percent) belong to the 31-40 age group.

Growth of the Mortgage Market

The mortgage market is predominantly driven by local residents (95 percent). The average loan amount is 1.7 million dirhams, with a typical repayment term of 21 years. The report mentions that over the past three years, the growth in mortgage transactions consistently surpassed that of ready property sales. In 2023, mortgage transactions grew by 29 percent, while sales of ready properties showed a 21 percent increase. In 2024, mortgage transactions grew by 3.5 times that of ready property sales, with 39 percent growth compared to an 11 percent sales increase.

How to Obtain a Mortgage in Dubai

According to an expert, buying a property is a "wise decision" as it allows one to build their own equity, in contrast to paying rent that doesn't entail ownership rights. The CEO of Coldwell Banker notes that the amounts spent on rent could be more usefully allocated to mortgage repayments, eventually leading to full ownership.

New property owners must make an initial investment, which typically amounts to about 26 percent of the purchase price. This includes a 20 percent down payment and approximately 6 percent transaction fees. Prospective buyers are also advised to research the real market value of a property before purchasing. They should also consider community service fees and utility costs. Generally, the maintenance costs for apartments are higher than those for villas.

The mortgage acquisition process in Dubai is relatively straightforward, although specific requirements may vary among banks and individuals' financial circumstances. Typically, most banks require at least a 15,000 dirham monthly salary for mortgage applications, though some may accept lower incomes depending on credit scores and overall financial stability.

If salary criteria are met and the necessary documents are available, many banks provide immediate pre-approval for mortgages, enabling buyers to quickly proceed with property purchases. However, it's important to note that banks may have different requirements beyond income, such as length of employment or existing debt levels. Therefore, comparing various banks' offers is advisable to find the most suitable option.

Summary

An increasing number of renters in Dubai are choosing to buy property instead of renting. Due to significant rent hikes and eviction notices, purchasing is becoming more attractive, especially for those planning long-term in the UAE. With favorable mortgage conditions and stable financing options, buying property seems not only an emotional but also a financially sound decision.