Kingsley Properties

Time ripe for buying property in Dubai on Mortgage

Property deals are soaring in the UAE and the outlook ahead is bullish especially for first-time mortgage buyers, according to banking and property experts.
Three weeks ago, the off-plan Bloom Living project got launched in Abu Dhabi and sold off within four hours. Last week, Dubai witnessed a record villa sale worth Dh280 million in Palm Jumeirah.
The strong first-quarter performance in 2022 is continuing an upward trajectory from 2021 when the UAE’s non-oil economy was among the first to bounce back even as the world suffered from the pains of the Covid19 pandemic.
This rising trend has been a result of various factors coming together. The influx of people has raised the population in recent years and the UAE has become a top-choice destination on the world atlas. Dubai Expo 2020 had a big impact on the hospitality and travel industries with a knock-on effect on real estate.
Currently, though, villas are in short supply, especially in Abu Dhabi, and the reason for off-plan properties being lapped up quickly. But the Palm Jumeirah record sale, according to a senior official at Mashreq Bank wishing to remain unnamed, is representing a flurry of activity in the secondary or resale market.
According to the official, “the property prices are spiking up a bit so the seller market is on the rise. Plenty of secondary market transactions are happening in the market. Apart from resales, lot of equity release is starting to happen,” he said.
The seeds were sown early enough when most banks got the clearance to offer mortgages at higher loan-to-value (LTV) ratios, making property more accessible to first-time buyers, and at attractive prices.
With demand being raised to cater to what was then a oversupply in the housing market, it was a timely booster dose for the property industry. Going forward, banks will continue to hike interest rates in line with the global markets and US Fed rates although there are some local banks which still have some competitive offers going on..
For the uninitiated, LTV is the amount the bank offers as mortgage to fund the property against the prospective buyer’s stake.
Pre-Covid19, buyers had to front up 25 percent of the property value. Those in turn were inflated but recessionary pressure started to reflect the demand v supply equation more fairly.
Even as the pandemic kicked in by mid-2020, a UAE decree made it possible for LTV to increase from 75% to 80%. Some banks went even further to add incidental buying costs in Dubai such as the DLD and brokerage fees into the mortgage amount, thus raising the LTV up to 85%.
Besides the LTV ratio, the EIBOR (Inter-Bank rate benchmark in the UAE) rates came down, which meant the rate of interest on mortgages for banks technically came down to as low as 1.49%. However to adjust for their profits, banks introduced three to five-year periods for fixed interest rates of 3% and above.


With a robust, prompt response in vaccination and changing geopolitics forcing the wealthy from Russia and Europe to look at greener pastures in Dubai, things are looking only brighter.
Yet, there are still deals to be made if you are looking to buy the property, whether as a buyer or seller. For those willing to disinvest, their property value is on the bounce. On the other hand, those sitting on the fence thinking of buying can act at attractive price points now while getting mortgages on rates for a fixed period.
The US Fed rates are expected to rise in the next quarter as well, and so should the variable rates with the UAE banks.
The first half of April saw Dh9.2 billion worth of transactions of which Dh4.29bn were mortgage buyers. With the average rent in Dubai showing an increase of 13 percent year on year as of March 2022, the next couple of months hold a window of opportunity for mortgage buyers as well.

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