Dubai property demand steady despite higher mortgage rates
Despite the second 0.25 percent increase on Wednesday, March 22, it is not expected to deter end users from investing in Dubai’s real estate market. Market sources claim that the main factor driving the resurgence of mortgage demand is the reputation of the Dubai and UAE real estate market as a reliable and secure investment option, which outweighs all other considerations.
In January and February 2022, mortgage rates were around 2.99 percent, whereas they currently range between 5.75 and 6 percent.
As part of their Ramadan promotions, banks are offering 5-year fixed-rate mortgages at 5% to maintain momentum. In the event that interest rates decrease in the next year or two, borrowers have the flexibility to renegotiate the agreement and repay at the revised rates.
Despite the current record-low interest rates, the number of real estate deals backed by mortgages in Dubai during January and February exceeds the figures from the same period last year. Since March 2022, both interest rates and mortgage loans have been on the rise, with a total of nine increases, including the most recent one that occurred yesterday.
The mortgage data for January and February 2023 is somewhat surprising, given the significant decline observed in Q4-2022. It was expected that higher borrowing rates would significantly reduce the demand from end users, with cash-ready buyers, predominantly investors, taking the lead.
However, the actual trend in deals since the beginning of this year tells a different story. “Mortgage transactions in the first two months have grown by 20 percent compared to 2022 in Dubai,” stated Mohamad Kaswani, Managing Director of Mortgage Finder. “We are already witnessing application volumes surpassing Q1-2022 by more than 40 percent, indicating a continued increase in mortgage demand.”