Why rent first over purchase?

[SimonC]

Having spent some time going through some of the posts from people looking to move to Dubai, the general advice seems to be to rent rather then buy?

Given that it seems you have to pay a year in advance, what is the logic of renting over buying?

I understand that a deposit needs to be found for purchase, but this would probably equate to your years rent? Also, given that rental prices seem so high, subject to location, it would be relatively easy to rent your property out should you wish/need to leave?

In fact, the more I think of it, surely the safer option (financially) is to buy, because if your move does not work out say after 6 months, you are not going to 'lose' half of your rent?

Apologies if I have missed something blindingly obvious, what are your thoughts?

PS can somebody expalin the purchase process, i.e. is there such a thing as stamp duty, assume no tax on disposal, what are the interest rates linked to and can you opt for a base/euro/dollar pegged loan?

Many Thanks

[sgilli3]

I personally would never buy before renting in an area.
I believe you need to get "the real feel" of an area before committing long term to it.
An area that you drive through and see a great house in, may not necessarily be an ideal area for you.
You may find that the community feel you were looking for doesnt actually exist, that the traffic to and from the house is worse at times, other than when you have been past.
etc etc.
This is just my opinion...not just for Dubai, but anywhere in the world

[SimonC]

Originally Posted by sgilli3

I personally would never buy before renting in an area.
I believe you need to get "the real feel" of an area before committing long term to it.
An area that you drive through and see a great house in, may not necessarily be an ideal area for you.
You may find that the community feel you were looking for doesnt actually exist, that the traffic to and from the house is worse at times, other than when you have been past.
etc etc.
This is just my opinion...not just for Dubai, but anywhere in the world

Point accepted and ordinarily I would agree. My point was that having spoken to some ex colleagues who live and work out there, certain areas seem fairly safe (by safe I mean good location) in terms of ex pat community, close to schools etc. If these areas are popular now it should hold that they will be popular in the short/medium term?

If you could pay rent monthly and the figures were sensible I would agree. but looking at some 'back of a fag packet' calculations it seems that rental figures equate to 8-10% yield?!

Surely it would be mad to rent if you can get a mortgage instead. If the rental market is so strong, of the area works out wrong for you it could be rented?

[Elphaba]

I agree with Sgilli's comments, but would add some others.

1. Property is an investment and as such there is no guarantee that it will go up in value. It could fall in value too.

2. The UAE is NOT the west. Non-Emirati ownership is relatively new and you do not have the same security of tenure as elsewhere. Remember this is not a democracy and laws can, and do, change overnight.

3. The mortgage market is restrictive - lenders have panels of developers. Most mortgages are in UAE Dirhams with interest rates of around 8%. Deposits are required of between 10 and 20% depending on the development.

4. A major international bank, that was lending no higher than 70% loan to value (and in assorted currencies) has just pulled out of the market. This will be for good reason.

5. Build quality frequently leaves something to be desired.

Have you not considered that there are reasons why many people don't buy?

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[SimonC]

Originally Posted by Elphaba

I agree with Sgilli's comments, but would add some others.

1. Property is an investment and as such there is no guarantee that it will go up in value. It could fall in value too.

2. The UAE is NOT the west. Non-Emirati ownership is relatively new and you do not have the same security of tenure as elsewhere. Remember this is not a democracy and laws can, and do, change overnight.

3. The mortgage market is restrictive - lenders have panels of developers. Most mortgages are in UAE Dirhams with interest rates of around 8%. Deposits are required of between 10 and 20% depending on the development.

4. A major international bank, that was lending no higher than 70% loan to value (and in assorted currencies) has just pulled out of the market. This will be for good reason.

5. Build quality frequently leaves something to be desired.

Have you not considered that there are reasons why many people don't buy?


-

1, I accept this as a given. However as a medium to long term play I would not be bothered with capital value in the short term as long as yield covered liability

2, This is probably the most interesting as in terms of event risk it has the most risk attached, given that it is a complete unknown. What is the position of tenure?

3, Who are the main players? My understanding was that the entrance of high street names i.e. Barclays etc was making market more competitive?

4, Can you name names?

5, I am not saying necessarily that I am right or wrong, purely interested in the debate and to understand where the statement 'don't buy' comes from

[Elphaba]

2. As I said this is not a democracy - you have limited rights over land etc.

3. As I said the available lenders depend on the developer you are buying from. You do not have a free choice. In some cases only one bank will lend on a specific development.

4. Barclays out here are a joke - totally incompetant. The offshore or UAE 'divisions' of financial companies you know in the UK are not the same & are run totally differently.

5. Lloyds TSB International has pulled out of the Dubai market - at least for the time being.

Again - Dubai/the UAE is very different to the UK.

_

[SimonC]

Following that premise through therefore, as an expat, there would never be a good time to buy because of the 'sword of damacles' issue? There must be some who buy or have bought (maybe yourself included) I was trying to understand what tips the decision.

Can you expand on the Barclays cooment? Who are the good operators out there and can you get a currecy mortgage?

[Elphaba]

In short - there are no 'good' lenders. Mortgages & house purchase are a nightmare with little protection for the purchaser. Forget consumer protection. Barclays are incompetent - what else is there to say?

The main provider of currency mortgages has just pulled out & as I keep saying you won't have a wide choice of lenders so you can't select one on the same basis as you do in the UK. Your 'choice' will be dictated by the development.

If you decide to buy you'll need to talk to a good broker.


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[marc]

you should always rent in a place before buying, always, full stop.

[SimonC]

Originally Posted by marc

you should always rent in a place before buying, always, full stop.

Completely agree, unless that is you are forced to pay a years rent in advance. Then surely the maths must be done to see if a purchase is a better option? If it doesn't work you can always rent?