Dubai rent vs buy: why an AED 1.5m flat does not break even in five years

Most rent-vs-buy guides for Dubai compare one number (rent) against another (the mortgage instalment) and call the difference the answer. That skips the deposit sitting idle, the fees paid once at the start and once at the exit, and what owning costs to run every year beyond the mortgage. One widely repeated rule of thumb puts the break-even point at three to five years, or two to three for a cash buyer, but the guides stating it never publish the assumptions behind it, and the figure moves once those are made explicit. This article builds the calculation from scratch and shows where the arithmetic lands.

What this calculation includes, and what it assumes

A full comparison needs six categories of numbers: the cost of buying, the recurring cost of owning, the cost of renting, the return given up on the deposit and fees, the dated mortgage rate on offer, and the cost of selling. Some inputs below carry a citable source; others are the Writer's own assumptions, labelled as such. Nothing here predicts where Dubai prices or rents are headed.

Worked example, stated in full:

• Purchase price: AED 1,500,000, for a ready (not off-plan) apartment of roughly 1,000 sq ft.
• Comparable rent for an equivalent unit: AED 90,000 a year. This is an assumption the Writer chose (a 6% gross yield); no verified citywide yield figure exists to anchor it to.
• Down payment: 20%, the minimum for an expatriate buyer on a first property at or below AED 5 million under the Central Bank's loan-to-value rules (70% above that, 60% on a second property, 50% on any off-plan purchase): AED 300,000. Loan amount: AED 1,200,000.
• Mortgage rate: 3.95%, the advertised "from" rate at Dubai Islamic Bank in a bank-rate comparison dated 21 September 2026 that also lists 3.89% at Emirates NBD; an individual borrower's actual rate depends on salary transfer, loan-to-value and profile.
• Mortgage term: 25 years, the maximum the Central Bank permits for an expatriate borrower, whose total monthly debt obligations are separately capped at 50% of gross income (30% for pensioners), with maximum age at maturity of 65 for expatriates and 70 for UAE nationals.
• Holding period: the base case is 5 years, repeated at 3, 7 and 10 years below.
• Opportunity-cost rate: 5% a year, the Writer's own assumption for what the buyer could otherwise earn by investing the deposit and fees instead of spending them. Not a cited statistic, and varied in the sensitivity check.
• Property price and rent are both held flat for the holding period: a simplifying assumption, not a forecast, as the market-context section below shows.

Upfront buying costs

This model assumes the buyer pays the full 4% DLD registration fee. The Resolution creating the fee splits it 2% seller / 2% buyer by default and lets the parties agree a different allocation; buyers paying all of it is reported for secondary-market deals but was not confirmed by a primary source, so treat it as the cautious case. If you pay only the 2% default share, the upfront figure falls accordingly. On a AED 1,500,000 purchase:

That total is about 6.8% of the purchase price, matching the order-of-magnitude figure some competitor guides quote once itemised. It sits on top of the AED 300,000 down payment, which is capital, not a cost: it comes back to the buyer at resale. Total cash needed on day one is AED 401,885.

Annual ownership costs while you hold

Beyond the mortgage, an owner-occupier pays four more things yearly. None has a published citywide average, so the figures below are the Writer's own midpoint choices from the available ranges, flagged rather than asserted as fact:

Service charges are not freely set by the management company: under Law No. 6 of 2019, a management entity may not charge owners for shared-area upkeep without a RERA-approved, audited budget, and must keep a separate cash reserve for emergencies and equipment replacement. An owner who lets the unit out stays liable for service charges even if the tenancy agreement tries to shift that cost onto the tenant.

The mortgage also carries interest. Spreading the AED 1,200,000 loan over 25 years in equal annual principal instalments (AED 48,000 a year), simpler than the equal-monthly-payment schedule a bank actually uses but easier to audit line by line, gives:

Only the interest column counts as a cost here. The principal column is the owner's own money moving from cash into equity; it comes back at resale, so counting it as a cost would double-count it. Total interest over the 5-year base case: AED 218,040. Outstanding balance after 5 years: AED 960,000.

What renting costs across the same years

A tenant in the AED 90,000-a-year comparable unit pays:

Over five years that is AED 450,000 in rent, AED 888.75 in Ejari fees, AED 22,500 in housing fee, and AED 4,725 at signing: AED 478,114 total. The refundable deposit sits outside that total; the interest it would have earned if invested is left out as immaterial.

The opportunity cost of your deposit

The buyer's AED 401,885 (deposit plus fees) stops being available to invest elsewhere the moment it is spent. A renter who never spends it could put it to work instead. At the 5% a year this example assumes, compounding annually, the forgone return over 5 years is AED 401,885 times (1.05 to the power 5, minus 1), or AED 111,033: the single largest cost line here, and the one the Writer had to assume rather than cite. Change the assumed return and this number moves with it, which the sensitivity check below does.

Selling costs at the exit

Assuming the property sells for the same AED 1,500,000 it was bought for, no appreciation, by design:

Combined buying and selling costs total roughly AED 145,735 against a AED 1,500,000 property, close to the order-of-magnitude figure some competitor guides cite for both ends combined, though those guides tend to omit the NOC fee and early-settlement penalty.

The break-even calculation

Putting it together for the 5-year base case:

Under these assumptions, owning costs AED 218,694 more than renting over five years, not less, as the commonly quoted three-to-five-year rule implies. The same arithmetic at other horizons tells a consistent story:

The gap widens with time, because the forgone return on the buyer's locked-up capital compounds every year while flat rent does not. Owning's running costs (interest plus service charges, maintenance, insurance and housing fee, excluding principal) are in fact lower than renting's annual outlay past the first year or two. What erases that advantage is the one-time cost on both ends, roughly AED 145,735 for buying and selling against AED 4,725 for renting, plus the opportunity cost of capital no longer invested. With zero appreciation assumed, there is no break-even point within the horizons modelled here.

Sensitivity check: what it would take to break even

The missing ingredient above is price appreciation, which this article does not assume by default. The available data points in different directions depending on the period examined (the ValuStrat index rose 19.8% in 2025 and fell 3.1% year-on-year by August 2026), so future appreciation is treated as unknown rather than forecast either way. Solving instead for the annual appreciation rate that would make owning and renting cost the same by a given year shows what the market would have to do:

Those rates are not extreme by Dubai's recent history: the ValuStrat Price Index closed 2025 at 240.4 points, up 19.8% year on year, villas up 25.1% and apartments up 14.2%. But the most recent reading, for August 2026, has the same index at 218.8, down 3.1% year on year, apartments down 5.3% and villas down 1.7%, the first sustained annual decline of the current cycle. Whether the next five to ten years look more like 2025 or like the second half of 2026 is not something this article can answer; the table above lets a reader substitute their own view of future prices rather than inherit one.

The mortgage rate matters far less. Re-running the 5-year interest line at the lowest and highest advertised rates in the same bank comparison, 3.75% against 4.05% versus the 3.95% used above, moves total interest by only about AED 11,040 lower or AED 5,520 higher over five years, a small fraction of the roughly AED 218,694 gap. Which bank quotes you matters less than what you assume about appreciation and the return on your deposit.

Market context: prices and rents in late 2026

The Central Bank's benchmark Base Rate rose 25 basis points, from 3.65% to 3.90%, effective 17 September 2026, mirroring a same-size US Federal Reserve move. This rests on consistent reporting across multiple outlets citing the central bank's release; a primary-document check could not independently confirm the figure. Bank mortgage pricing, including the 3.75%-4.05% range used above, sits on top of that benchmark.

On sales volume, Dubai recorded AED 252 billion across 60,303 deals in Q1 2026, up 31% year on year by value and 6% by volume, per the Dubai Land Department's own release, correcting a since-circulated claim of 22.2% growth from a different source. On rents, one portal-sourced guide reports growth easing from 6.2% in December 2025 to 1.5% in April 2026, while CBRE separately reported growth easing to about 4.1% in Q1 2026. The two use different periods and methods and could not be reconciled, so this article treats 2026 rental growth as unsettled rather than picking one figure.

None of this carries a tax drag on either side. Dubai levies no annual property tax, no capital gains tax on an individual selling personally held property, and no personal income tax on rental income, so the numbers above are not missing a tax line that would apply in many other markets.

What this does not settle

This is one worked example at one price, one rent and one mortgage rate. Change any input and the numbers move. What carries over is the method: count one-time costs on both ends in full, don't forget the return given up on the deposit, and treat any appreciation rate as an assumption, not a fact, until checked against the price and quote on the table.