Khaleej Times - Dubai Low interest rates boost mortgage transactions in 2021

Vijay Valecha, Special to Khaleej Times October 25, 2021

For those investors who are looking to buy property in Dubai, time is high to cash on this opportunity before interest rates begin to rise next year, say industry analysts.

During the summer, local banks further dropped mortgage rates to increase their market share in the growing market.

With property prices recovering over the last few quarters and interest at a record low, demand for a mortgage in Dubai has grown exponentially in the first three quarters of 2021, growing by 68 per cent compared to last year and 71 per cent more than 2019, according to the data revealed by Mortgage Finder on Sunday.

“Mortgage buyers should keep a close eye on developments in the US where Covid-19 stimulus from the Federal Reserve looks set to be rolled back as the economic outlook improves. We can expect interest rates to start the slow rise back from todays’ record lows at some time in 2022, so mortgage buyers would be advised to secure a deal before that happens and fix the interest rate for the next few years at least,” Betterhomes analysts said.

 

Vijay Valecha, chief investment officer at Century Financial, also expects rising inflation expectations and burgeoning commodity prices could force the US Federal Reserve to go for earlier than expected rate hikes.

“Financial markets are already pricing in two interest rate hikes from Fed in 2022. Moreover, Fed is likely to announce tapering in the November meeting,” added Valecha.

Data released by mortgage Finder, an independent mortgage consultancy in the UAE, on Sunday revealed that Q3 2020 was a notably active period in the mortgage industry, as banks and other stakeholders involved in the mortgage process reopened for business allowing mortgage transactions that had been placed on hold during lockdown to proceed as normal again.

“It has been a very busy year, with the total number of mortgages registered in Dubai during the first three quarters already overtaking the total number registered in the whole of 2020. This is so exciting to see as more buyers are getting onto the housing ladder,” said Warren Philliskirk, director at Mortgage Finder.

“Now with Expo opening, we’re even more excited to see what happens as we enter the final quarter of the year,” he added.

Low interest rate is a major factor attracting new buyers to the local property market as 83 per cent of mortgage transactions were conducted by people who were purchasing property for the first time in the UAE.

In 2020, the UAE Central Bank reduced the down payment requirement for first-time buyers in the UAE by five per cent, taking it to 20 per cent for non-UAE nationals and 15 per cent for nationals. It is positive to see first-time buyers take advantage of this down payment reduction and also of the record low-interest-rate environment currently being experienced in the UAE.

Dubai’s real estate market has seen made records being broken this year both in terms of the value and volume of transactions as foreign investors flocked to the local market to cash in on the attractive prices.

The property sector reached a new milestone in the third quarter of 2021, as it became the best third quarter ever in terms of transaction value in the history of the emirate’s real estate sector, reaching Dh42.35 billion in September. While real estate transactions crossed the Dh100 billion mark in September due to phenomenal growth in monthly sales, thanks to the presence of a good number of international investors in the market.

Villa/townhouse properties accounted for 63 per cent of mortgage purchases while apartments made up 35 per cent and the remaining 2 per cent was attributed to land, commercial and other property types. The most popular villa communities were Jumeirah Golf Estates, Arabian Ranches and The Springs.