The intriguing new Rent vs Buy Calculator created by the real estate platform Propertyfinder caught my eye earlier this month. It compares the total cost of renting with the total cost of buying in the UAE.
Its conclusion is that the monthly cost of buying is presently cheaper than renting.
However useful this calculation is in planning your annual personal budgeting, it does rather miss another very decisive reason for owning rather than renting a home - provided you are looking at a long-term horizon and not merely passing through the UAE for a year or two.
A mortgaged-home, bought at the right time, is by far the best financial investment anybody can make.
Over time all global central banks allow the value of their currencies to depreciate to pay their national debt off in a relatively painless way. This effectively steals from savers whose money falls in value.
But if you own a home it works the other way around. Depreciating currencies also mean asset price inflation is guaranteed over the long-term.
So a fixed asset like a house will rise in value, while the fixed amount of the mortgage used to buy it in the first place will remain unchanged. The gap between the two amounts will be a growing capital gain for the owners.
If, by contrast, you stay renting the same property over this period, you will have paid a similar, or perhaps higher amount according to the new calculator, but you will have precisely no capital gain.
Home owners effectively win a big cash draw, with a free home for life when the mortgage is finally paid off, while renters can only count the fabulous sum that they have lost, just to live comfortably. Buyers effectively get their ‘rent’ back with interest.
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Earlier this year I wrote of a visit to Thailand and lunch with a couple of retiree expat friends who each made a million on their homes in The Meadows, Dubai. They were early buyers in 2003 and sold about a decade or so later.
Of course, the current generation of buyers may not be so lucky - but, remember, those two millionaire expat pensioners had both been owners through the global financial crash and the Dubai real estate bust that came with it.
They just carried on paying their mortgage and waited for prices to recover. As observed earlier, house prices always rise over the long-term because the central banks have to devalue money to balance their books.
Along with many analysts, I reckon we are currently at, or very close to, the bottom of the price correction that began four years ago with a doubling of transaction fees, tighter mortgage lending criteria and an unfortunately timed oil price collapse.
Brent crude topped $80 a barrel while I was penning this article. The UAE as the trading hub of the oil-rich Middle East as well as a substantial low-cost producer is obviously going to benefit, and optimism among local businesses is turning up.
How long before the recruiters are busy again and new staff require accommodation? Those 15,000 new units delivered in Dubai in the first eight months of this year won’t go that far.
Demand will exceed supply and house prices will begin the bullish phase of the typical three-to-four year property up-cycle. It is always a good idea to be in at the start, or even slightly ahead of this cycle, if you want to maximize your capital gains.
That said you should never get too strung out about house prices when you own a house. Given that you are usually buying with a five to f15-year time frame, expect fluctuations in value along the way.
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The best objection to this investment plan is that you do presently require a hefty 25 per cent deposit to get a mortgage to buy a home in the UAE. Not everybody has Dh500,000 lying around to buy a Dh2 million villa.
But if you are ever going to beg or borrow from your relatives, this is time to do it. As a young journalist I slept on a friend’s couch for two years to save up, got a mortgage saving scheme and did some extra freelance work.
People then told me UK housing was far too expensive. Actually it initially went though a boom-and-bust cycle and I was no better off seven years down the line. But 32 years after I first bought that apartment, it would now be worth 28 times my deposit.
Some home owners naturally worry about what happens if they lose their job. The answer is find another one; if you really can’t or it does not provide sufficient income for the mortgage, then rent the house out.
My original decision to move to Dubai came because I was made redundant in London; I then rented out my house to pay the mortgage while I was in the UAE.
Remember, even if you get fired the bank cannot call your mortgage in early unless you start missing payments.
Owning a house might be an additional headache if you lose your job but it does not have to be a financial disaster. It could become a source of additional income if the rent exceeds your mortgage payments, or the source of the deposit on a second property.
My only real quibble with the calculator is that it excludes maintenance, and this can be a significant cost factor to ownership. In the UAE particularly, the maintenance of air-conditioning in villas can be onerous, making apartments arguably a better buy.
But don’t miss the wood for the trees when thinking about buying or renting UAE property. There is solid oak in the capital accumulation that comes with long-term ownership of mortgaged property, and money spent on rents just goes up in smoke.
Peter Cooper has been writing about finance in the Gulf for more than two decades
Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
The specs
Engine: 4.0-litre flat-six
Torque: 450Nm at 6,100rpm
Transmission: 7-speed PDK auto or 6-speed manual
Fuel economy, combined: 13.8L/100km
On sale: Available to order now
OPINIONS ON PALESTINE & ISRAEL
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
The%20specs
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Killing of Qassem Suleimani
COMPANY%20PROFILE
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The specs
Engine: Four electric motors, one at each wheel
Power: 579hp
Torque: 859Nm
Transmission: Single-speed automatic
Price: From Dh825,900
On sale: Now
At a glance
Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.
Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year
Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month
Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30
Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse
Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth
Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances
Test
Director: S Sashikanth
Cast: Nayanthara, Siddharth, Meera Jasmine, R Madhavan
Star rating: 2/5
The Bio
Name: Lynn Davison
Profession: History teacher at Al Yasmina Academy, Abu Dhabi
Children: She has one son, Casey, 28
Hometown: Pontefract, West Yorkshire in the UK
Favourite book: The Alchemist by Paulo Coelho
Favourite Author: CJ Sansom
Favourite holiday destination: Bali
Favourite food: A Sunday roast
If you go
The flights
Emirates (www.emirates.com) and Etihad (www.etihad.com) both fly direct to Bengaluru, with return fares from Dh 1240. From Bengaluru airport, Coorg is a five-hour drive by car.
The hotels
The Tamara (www.thetamara.com) is located inside a working coffee plantation and offers individual villas with sprawling views of the hills (tariff from Dh1,300, including taxes and breakfast).
When to go
Coorg is an all-year destination, with the peak season for travel extending from the cooler months between October and March.
ADCC AFC Women’s Champions League Group A fixtures
October 3: v Wuhan Jiangda Women’s FC
October 6: v Hyundai Steel Red Angels Women’s FC
October 9: v Sabah FA
READ MORE ABOUT CORONAVIRUS
Abaya trends
The utilitarian robe held dear by Arab women is undergoing a change that reveals it as an elegant and graceful garment available in a range of colours and fabrics, while retaining its traditional appeal.
'Top Gun: Maverick'
Rating: 4/5
Directed by: Joseph Kosinski
Starring: Tom Cruise, Val Kilmer, Jennifer Connelly, Jon Hamm, Miles Teller, Glen Powell, Ed Harris
The smuggler
Eldarir had arrived at JFK in January 2020 with three suitcases, containing goods he valued at $300, when he was directed to a search area.
Officers found 41 gold artefacts among the bags, including amulets from a funerary set which prepared the deceased for the afterlife.
Also found was a cartouche of a Ptolemaic king on a relief that was originally part of a royal building or temple.
The largest single group of items found in Eldarir’s cases were 400 shabtis, or figurines.
Khouli conviction
Khouli smuggled items into the US by making false declarations to customs about the country of origin and value of the items.
According to Immigration and Customs Enforcement, he provided “false provenances which stated that [two] Egyptian antiquities were part of a collection assembled by Khouli's father in Israel in the 1960s” when in fact “Khouli acquired the Egyptian antiquities from other dealers”.
He was sentenced to one year of probation, six months of home confinement and 200 hours of community service in 2012 after admitting buying and smuggling Egyptian antiquities, including coffins, funerary boats and limestone figures.
For sale
A number of other items said to come from the collection of Ezeldeen Taha Eldarir are currently or recently for sale.
Their provenance is described in near identical terms as the British Museum shabti: bought from Salahaddin Sirmali, "authenticated and appraised" by Hossen Rashed, then imported to the US in 1948.
- An Egyptian Mummy mask dating from 700BC-30BC, is on offer for £11,807 ($15,275) online by a seller in Mexico
- A coffin lid dating back to 664BC-332BC was offered for sale by a Colorado-based art dealer, with a starting price of $65,000
- A shabti that was on sale through a Chicago-based coin dealer, dating from 1567BC-1085BC, is up for $1,950
In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
MATCH INFO
Schalke 0
Werder Bremen 1 (Bittencourt 32')
Man of the match Leonardo Bittencourt (Werder Bremen)
Dubai Bling season three
Cast: Loujain Adada, Zeina Khoury, Farhana Bodi, Ebraheem Al Samadi, Mona Kattan, and couples Safa & Fahad Siddiqui and DJ Bliss & Danya Mohammed
Rating: 1/5
Where to submit a sample
Volunteers of all ages can submit DNA samples at centres across Abu Dhabi, including: Abu Dhabi National Exhibition Centre (Adnec), Biogenix Labs in Masdar City, NMC Royal Hospital in Khalifa City, NMC Royal Medical Centre, Abu Dhabi, NMC Royal Women's Hospital, Bareen International Hospital, Al Towayya in Al Ain, NMC Specialty Hospital, Al Ain
The specs: Macan Turbo
Engine: Dual synchronous electric motors
Power: 639hp
Torque: 1,130Nm
Transmission: Single-speed automatic
Touring range: 591km
Price: From Dh412,500
On sale: Deliveries start in October
