Renovating Vs. Buying New Homes: Which is More Profitable?

According to experts, the UAE property market will be worth $0.68 trillion by December 2024 and is predicted to continue to trend upwards in the near future. In such a rising real estate market, it is crucial to analyze whether to buy a new home or renovate an existing one.

This article walks you through some quick cost analyses of renovating vs. buying a new home in the UAE.

Cost Analysis of Renovating Vs. Buying New Homes

Buying a new home seems easier with a fresh start, modern designs, and no ongoing renovations. Renovating offers customization but may not be profitable in the long run.

Cost of Building a New House

• Initial Search Cost: The first financial commitment when building a new house involves initial search costs for finding land, hiring a real estate agent, conducting site surveys, researching contractors and architects, and obtaining necessary permits.
• One-time Purchase Price: A newly built home’s one-time purchase price includes the land cost and construction. Additional expenses may include landscaping, utility connections, and custom features, which can significantly increase the overall price.
• Recurring Maintenance Costs: One advantage of a newly built home is the reduced need for immediate maintenance. However, there are still recurring costs, such as property taxes, insurance, and homeowners’ association fees, if applicable.
• Long-term Appreciation Value: A well-built new home in a desirable location has strong potential for appreciation, mainly as the area develops and demand rises. Newer homes also benefit from energy efficiency and modern design, enhancing their market appeal.

Cost of Renovating an Old House

• Initial Assessment Cost: This typically involves hiring professionals to inspect the home for structural issues, outdated systems, and potential hazards like asbestos or lead paint.
• Renovation Cost: Significant renovations, such as modernizing kitchens and bathrooms or making structural changes, can be costly. Your total costs may also rise due to the need for specialized materials or craftsmen.
• Recurring Maintenance Cost: This includes the upkeep of older systems (like plumbing, electrical, and heating), maintaining older materials, and addressing wear and tear. These costs can be unpredictable and may increase since it is an old building.
• Long-term Appreciation Value: While a well-renovated house can significantly raise your property price, it may not generate similar returns if the house’s location isn’t primary or if the building is too old.

Which is Better? Renovating Vs. Buying New Homes in UAE

Buying a new home might be more profitable if you’re looking for a low-maintenance option and potential long-term appreciation and can afford the upfront costs.

Renovating only a part of your house will be cheaper. However, your cost analysis should also include the future appreciation value of your existing properties.

The Bottom Line

New properties usually have higher appreciation values than older ones. Thus, your cost analysis must always include your property’s long-term appreciation value, less the cost of buying or renovating your home. The greater the difference, the more profitable the option is for you.