A middle-income professional such as a business development manager can expect to earn Dh15,000 a month in the UAE, according to Payscale.com. The good news is that’s enough to fuel dreams of owning property in this country.
And for buyers, the rule of thumb is you should spend no more than 30 per cent of your income on housing. Zhann Jochinke, CEO, Keller Williams Real Estate Dubai, says that equates to about Dh4,500 a month.
“With prevailing mortgage rates today hovering around 4 per cent on a 25-year loan, they could purchase a property with an upper price point of between Dh1.1 million and Dh1.2 million (with a minimum 25 per cent down payment),” he says. “However, after factoring in monthly service charges (part of base housing costs) a purchase price of up to Dh850,000 is more realistic.”
Where to buy
Communities such as Silicon Oasis, Dubai Sports City and Jumeirah Village Circle offer entry-level two-bedroom apartments priced between Dh750,000 and Dh830,000, he adds.
Rajiv Ghanekar of Fine & Country Real Estate says affordable homes in ready projects with title deeds are available at International City. Studios here start at Dh325,000 and single-bedroom flats at Dh450,000. At Discovery Gardens, studios begin at Dh475,000, and one-bedroom apartments at Dh675,000. At Remraam in Dubailand studios start at Dh400,000, while one-bedroom units at Dh600,000. Similar prices and configurations are on sale at Dubai Sports City and Silicon Oasis.
“Al Ghadeer in Abu Dhabi remains one of the few options for individuals between the Dh10,000-Dh15,000 salary bracket,” says Robin Teh, Country Manager, Chestertons UAE. Challenges remain for the budget buyer, however, most notably there are fewer options and they are more far-flung, he says.
Not enough cash
The other big problem facing salaried residents is they simply may not be able to stump up the down payment, notes Jochinke. He says many buyers have difficulty in saving the 25 per cent of the flat’s total value that the UAE Central Bank requires. “A significant amount of expats earning Dh15,000 a month or less aren’t able to accrue this hefty amount. With large rent instalment cheques, remittances and the average cost of living in Dubai to be accounted for, it’s not uncommon for people to be living pay cheque to pay cheque.”
“When they were introduced in late 2013, the regulations helped cool a rapidly inflating real estate market. Now, two years later the market could benefit from these being reevaluated, particularly for first-time end users. A reduction in down payment requirements to 10-15 per cent would greatly help expand home purchases across the UAE.”
Financing
The mortgage scenario is more positive since most banks require a minimum monthly salary of Dh15,000, although a few do lend to professionals earning Dh10,000, says Jean-Luc Desbois, Managing Director at the consultancy Home Matters. Interest rates start at about 2.99 per cent. Borrowers are restricted to a maximum debt service ratio of 50 per cent of guaranteed salary a month to service existing and future liabilities, such as car and personal loans. “Typically, the cost of borrowing Dh1 million over 25 years is about Dh5,300 a month,” Desbois says.
Ghanekar cautions investors that some banks have a minimum lending policy. “Several banks want to lend a minimum of Dh500,000 towards a mortgage loan with the exception of a handful who would drop this down to Dh300,000 as 75 per cent of the property value,” he says.
For those who are still undecided, Teh offers compelling arguments. “Those who are renting will benefit from fixed monthly outgoings since rents are recalculated every year. This helps budget finances, knowing costs associated with housing are fixed for the next 10-15 years. Secondly, one benefits from owning a property towards the end of the mortgage tenor, which also includes capital appreciation going forward.”
