Rents are going up and tenants are being forced to negotiate hard to stay in their homes another year. So should you buy a house in UAE  instead? We find out.

While laws are in place to prevent landlords raising rents by extortionate amounts, landlords often get round the regulations by telling tenants they plan to move in or to sell the property. When the tenant moves out, they change their mind and put the property back on the market. [Related: 10 things your landlord won’t tell you]

The practice, coupled with the UAE’s economic resurgence following the global economic crisis, has sent rents spiraling upwards in recent months.

According to a survey from classifieds website Dubizzle, Dubai has experienced price increases of up to 61 percent in some areas in the last year. And while rents in Sharjah have also risen by 30 percent in some areas, Abu Dhabi has seen a drop of 18 percent as more units come online.

Better Homes hiring more agents

The situation in Dubai, however, leaves tenants in a quandary as to whether to switch from renting to buying a house to ensure they have a fixed amount to pay for their housing, in turn, avoiding rocketing rental rates. However, to buy a house offers no guarantees either.

The Dubai property market has rebounded from the credit crunch when prices fell by more than half on The Palm – the emirate’s benchmark for the housing market.

Property agents Asteco recently revealed Dubai apartment prices rose 27 percent in the year to March, with average villa prices up 24 percent.

Probably one of the clearest signs of the resurgence is a recent announcement from Dubai’s largest realtor, Better Homes, that it is looking to increase its agent ranks by 150, having already added over 100 in the last year.

Flipping of Emaar’s Mira townhouses

But buyers still need to tread carefully.

While the credit crunch bought some sensibility to the market, it appears some investors have forgotten the lessons they learnt from the crash.

In April, Emaar launched its Mira townhouses, prompting queues of interested buyers who later scuffled outside the property developer’s office. Police were called, raising concerns that interest in the UAE’s property market was returning to the unhealthy levels witnessed during the boom.

Even worse is that flipping has also made a return; some of the purchased Mira homes were then re advertised the next day for prices 30 percent higher than those first marketed by Emaar.

If that kind of behavior keeps up, the property market could quickly get into difficulty.

Be savvier

With all this in mind, what is the solution? Well, it’s quite simple really. If you haven’t got a pot of cash stashed away to put a healthy deposit down (still around 20 per cent, although that might change) to secure a mortgage, then you will need to stick with renting.

But be savvier about where you rent and whom you rent from. There are still deals to be had and good landlords to rent from – you just need to hunt around. [Related: How to negotiate your rent]

If you do have enough for a deposit, you need to evaluate if you want to take a risk on buying and on taking out a mortgage.

A way of saving

For mortgages, it is a case of comparing what’s out there before deciding to buy a house, and making sure you are aware of all the potential fees you might pay.

If the property market stabilizes, it does make financial sense to buy; rather than giving, let’s say, AED 100,000 a year housing allowance to someone else, why not give it to yourself?

Even if the property does not go up in value by a dirham, you will still gain when you sell as all those years of mortgage payments will be yours to keep.

It’s effectively a way of saving. So will you buy a house or rent ?