Rent or buy? UAE rental costs cheaper than mortgage repayments in luxury neighbourhoods

The National

13 hours ago

Monthly rental costs in some parts of the UAE are cheaper than mortgage repayments, a new report has found.
The trend has put more emphasis on the rent-versus-buy debate, particularly for residents looking to settle in the long term, and comes as the national population surges.
The analysis, released by property developer Bloom Holding, was based on 2025 Property Finder data for two-bedroom homes.
The study compared monthly rents and mortgage payments across 77 neighbourhoods in Dubai, Abu Dhabi, Sharjah, Ajman and Ras Al Khaimah, finding that in more than half of those (44), renting works out cheaper in the short term.
The gap is most clear in Al Marjan Island, Ras Al Khaimah, where the average mortgage payment of Dh18,782 ($5,113) is nearly three times higher than average rent of Dh6,667 ($1,815).
This, according to independent mortgage expert Jon Bowe, is because land department fees and developer payment plans in RAK are different to elsewhere in the Emirates.
In contrast, Al Reef in Abu Dhabi offers better value for buyers, as mortgage payments are nearly 38 per cent lower than rent (Dh4,659 over Dh7,500, respectively).
In Dubai's Culture Village and Jumeirah Village Triangle (JVT), mortgage payments are more than 30 per cent lower than rent, suggesting high-potential entry points for homebuyers, the report says.
However, experts are quick to emphasise this is only the case if you are planning to live in a property for two years or less, otherwise buying provides more financial stability in the long term.
Can renting be more affordable?
Industry experts told The National a number of factors contributed to these findings, such as high property prices, steep down payments and a population that values flexibility.
'Even though rent prices have been increasing, property prices for purchase can be prohibitive for many residents, especially when down payments and continuing maintenance costs are taken into account," Ronan Arthur, director and head of residential valuation at property consultancy firm Cavendish Maxwell, said.
Mr Bowe said the primary obstacle for potential homeowners is the ability to afford the initial down payment, which is 20 per cent for properties under Dh5 million and 30 per cent if above, while self-employed buyers will need to pay even more.
"This is also the reason we've seen an influx in investors throughout Dubai due to the fact they're receiving higher income from rent than their mortgage payment is costing them, resulting in a higher return on investment."
Where do renters get better value?
The report highlights a clear divide between luxury and suburban communities. Luxury locations, such as Palm Jumeirah, Downtown Dubai, Emirates Hills and Al Marjan Island, tend to favour renters. High entry prices and service fees, combined with strong rental demand from expats and corporate tenants, make renting more feasible for most.
'Many investors and end users in these areas are willing to accept lower returns in exchange for capital appreciation, prestige and convenience,' Ayman Youssef, UAE managing director at global property company Coldwell Banker, said.
However, while mortgage costs can exceed rents in these areas, that doesn't mean buying isn't worthwhile.
Daniel Hadi, chief executive at Engel & Volkers Middle East, said: "Many buyers in these communities are focused on long-term capital appreciation or lifestyle benefits, not just monthly costs."
Meanwhile, suburban hubs such as Dubai's Town Square, Damac Hills, Dubai South, JVC, JVT and Al Reef in Abu Dhabi offer better value for buyers, as lower property prices and more manageable mortgages attract families and long-term residents.
Farooq Syed, chief executive of Dubai agency Springfield Properties, said such communities offer mortgage payments that are often 20 per cent to 35 per cent lower than equivalent rents. 'This affordability gap is driven by a combination of rising rental prices and stable mortgage rates, which have remained between 3.99 per cent to 4.5 per cent,' he added.
Historic boom
The UAE's property market is experiencing a historic boom. There were 226,000 transactions in Dubai last year, valued at a record Dh761 billion, a 36 per cent annual jump in volume.
In June, a Deutsche Bank report showed Dubai had recorded the highest growth globally for city centre property prices per square metre in the past five years.
This is largely driven by a soaring population. By the end of March, Dubai's population had risen to 3.92 million, with 89,695 new residents added in the first three months of the year, an average daily rise of about 1,000.
Last month, Abu Dhabi's population surpassed four million, fuelled by a 9 per cent increase to its workforce in 2024. Sharjah's population grew from 1.4 million in 2015 to 1.8 million in 2022, the emirate's most recent census in 2023 revealed.
This growth is fuelled by a young, international workforce and government initiatives, such as the golden visa and first-time homebuyer programmes, which aim to make the UAE a long-term home for expats.
As supply aims to catch up with demand, however, with a flood of new properties set to enter the market, a report by New York-based ratings agency Fitch Ratings predicted the city's real estate market would enter a 'moderate correction' in the second half of 2025. It forecast residential prices could fall by as much as 15 per cent as a record number of projects are launched.
While many homeowners remain unconcerned, the report found some prospective buyers were pausing to reassess.
"We are witnessing a gradual shift towards home ownership and that's not expected to change in the long term," said Mr Hadi.
Why mortgages still make sense
While renting may be cheaper month-to-month in many areas, experts warned that home ownership remains a safer bet for those planning to remain in the UAE for the long term.
Mr Arthur said, regardless of market conditions, monthly payments build equity through mortgage repayment rather than rent, which some people consider 'dead money'.
Mr Youssef added that buying "includes the potential for capital appreciation, projected supply and demand in the area, infrastructure development, quality of life, exclusivity and income potential".
However, he warned that buyers also need to factor in costs such as service charges, maintenance and future resale prospects.
Another important consideration is stability, said Mr Hadi. "While mortgage payments in fixed-rate structures remain consistent over time, rental rates can increase year after year. Rising rents can outpace inflation, eroding financial stability. Home ownership, by contrast, offers predictability and greater control over housing costs."
Property values in Dubai, for example, have historically trended upwards over the long term, so owning a home means you stand to benefit from capital appreciation, added Mr Hadi.
"If a property were to grow even modestly in value each year, that gain would be fully realised by the homeowner, adding further to their long-term wealth."
Ultimately, it depends on your timetable and goals, said Mr Syed. "If you're planning to live in Dubai for less than two years, renting is usually the more flexible and practical choice."
For anyone planning to stay three years or more, then buying typically becomes the more "financially sound" option, he added.
Navigating the decision
For renters feeling priced out, Mr Syed advised starting with a savings plan focused on building a down payment.
'Ownership may feel out of reach initially, but incremental steps create momentum. Rent-to-own schemes and developer-led payment plans are expanding, and many emerging communities still offer accessible entry points. Even if the first purchase isn't the dream home, it can be a strategic foothold, laying the groundwork for financial stability and long-term equity.'
Conversations with a mortgage adviser and an experienced real estate broker can help you understand how much you need to save, Mr Hadi added.
Mr Syed anticipates rent growth to continue at a 'more moderate pace', and for capital values in non-luxury segments to stabilise.
"As visa reforms and demographic shifts support long-term residency, the ownership proposition is likely to gain traction among first-time buyers and end users seeking cost control and asset growth."