Deciding whether to buy in Dubai

This summer a lot of Dubai residents are pondering whether to buy an apartment or villa in the near future from Emaar and alternatively on Palm Island.

Three factors are adding extra impetus to this dilemma. First, some of the actual accommodation will be completed in the New Year, so that makes this a real option as opposed to purely a financial investment.

Secondly, Emaar has now shifted its sales to expatriates from 99-year leases to freehold, which improves tenure rights. And thirdly, Emaar's mortgage company Amlak has lowered the minimum cash down payment from 30% to 10% for its mortgages, and the National Bank of Dubai has also started to offer mortgages.

Now consider this. The usual annual rental payment for a Dubai villa is required upfront, maybe in two checks. That will normally represent around 10% of the value of the property.

So buying a property with a 10% mortgage down payment involves no greater cash outflow, or arguably risk, than renting a similar property.

The upside for the buyer is that after paying the mortgage each year, the residual value of the home (i.e. selling price minus outstanding mortgage) will be for them to keep. In short housing is working as a store of value for the owner rather than as an annual expense as in the case of rental payments.

Now if you listen to Western legal firms they will tell you that your freehold title is not as solid in the UAE as it would be in the Western world. That maybe true.

However, the investment case looks an open and shut job by any rational criteria. In the worst scenario, you are no worse off than if you rented a property in Dubai. And even if rentals fall, mortgage payments rise and house prices drop, you would still have the cash stored in your home that would otherwise have been paid as rent.

So even if Dubai property does not prove to be the bargain it looks right now by any international standard, anyone buying on the generous mortgage terms now on offer can not really loose. Seldom do such opportunities occur in a lifetime, and those who do not take up this option now will kick themselves hard in future years.

Perhaps the England football captain David Beckham and his wife came to this view while on the Dubai beach before the World Cup football tournament. They are said to have decided to buy a $1.5m villa in Dubai.