A majority of UAE residents prefer to live in rented homes, but all is set to change in the coming five years, according a new report.
A new research from HSBC revealed 82 percent of people in the country who do not own their own home expect to do so in five years despite a complex market environment and low salary growth.
However, planning for this investment appears to be a concern with lack of funds for a deposit being cited as one of the main barriers to buying property, while poor budgeting practices resulted in the majority of recent home-owners overspending on their purchases, it said.
While the Dubai Land Department said total real estate transactions reached AED259 billion ($70.5bn) in 2016, dropping marginally from AED267bn in 2015 in January, it has never provided the spilt between resident and foreign buyers.
In its “Beyond the Bricks” report, HSBC said the sentiments of becoming home-owners are slightly higher than the global average of 73 percent, but in line with the attitudes of millennials in the country.
While 26 percent of people between 18 and 36 are home owners, 80 percent of non-owners in this segment intend to buy a home within five years.
Among the significant barriers highlighted were the need for a higher salary (62 percent) and the need to save more for a deposit (42 percent), while 82 percent of total non-owners in UAE said they only have an approximate, or “no budget” at all when they intend to buy.
As a result, home owners, who have purchased property recently, nearly seven in 10 (67 percent) spending more than they had initially budgeted.
The most common reasons for this overspend is broker fees (64 percent), legal fees (62 percent) and renovation costs (57 percent), with the bank claiming all these instances could be avoided with a well-structured financial plan.
Kunal Malani, head of customer value management, MENA, retail banking and wealth management, HSBC Middle East, said: “While we do appreciate that the market conditions today are challenging, there are clearly areas where people can make improvements. By getting a full view of your finances and remaining committed to a budget, you can go a long way towards reducing existing and future pain points.
“For example, we always advise people budget at least 35 percent for a deposit when looking to buy a home so that they can accommodate any unexpected costs and fees that arise.”
According to HSBC, home owners end up managing unexpected costs primarily by withdrawing from savings (59 percent), citing ways to overcome these costs by cutting back on spending.
Amongst the millennial non-owners intending to buy, the report said millennial are willing to make sacrifices with 45 percent ready to spend less on discretionary expenses.
“Today, half of millennial home owners (50 percent) have used the ‘bank of mum and dad’ as a source of funding, which is the highest globally. This far exceeds around a third of millennial home owners who relied on their parents in the UK (35 percent) and US (32 percent),” it said.
Craig Plumb, head of research - MENA, JLL, said: “With prices having declined over the past 18 months, 2017 will continue to be a buyer’s market in Dubai. Our research shows that sale prices are now bottoming out, although transaction volumes remain low.
“We believe the market is close to the bottom of its cycle, with some increases possible in the second half of 2017 as the market recovers again over the next few years. Given these conditions, now is a good time for those interested in buying property in Dubai,” he added.
The report is based on views of over 9,000 people in nine countries, and over 1,000 respondents in the UAE.
Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.