by Nbsrealestate
In 2024, a significant shift is expected in the UAE real estate landscape as more property buyers, especially end users, are projected to opt for mortgages. The catalyst behind this trend is the anticipated drop in interest rates, estimated to decrease by up to 100 basis points.
Real estate experts emphasize the substantial influence of mortgage rate fluctuations on the decision-making process of potential buyers in the United Arab Emirates. With the ongoing increase in rental prices in the country, many UAE renters are poised to seize the opportunity and transition to property ownership in the coming year.
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ValuStrat reports that cash transactions dominate Dubai’s real estate market, accounting for the majority of transactions. However, the third quarter of 2023 witnessed 8,238 mortgage transactions in Dubai, showcasing a notable presence alongside the 16,485 cash deals (excluding off-plan transactions). In contrast, Abu Dhabi presents a different scenario, where mortgage transactions play a more substantial role, recording 1,247 transactions compared to 890 cash transactions in the same quarter.
Following eleven rate hikes, predictions suggest that the US Federal Reserve will reduce rates by 25 to 100 basis points in 2024, directly impacting the UAE due to the dirham’s dollar-pegged status.
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Ayman Youssef, Managing Director of Coldwell Banker, notes the significant impact of lower rates on boosting demand and home sales, emphasizing that higher rates can decrease affordability and potentially slow down the market. However, in Dubai, the impact of higher interest rates is mitigated by the prevalence of off-plan sales, where developers offer payment plans.
Svetlana Vasilieva, Sales Director for Metropolitan Homes’ secondary market, underscores the profound influence of mortgage rate changes on real estate purchases in the UAE, particularly for end users. Predicting a 1 percent decrease in mortgage rates, she expects a significant increase in potential homeowners, making the market more accessible. This decrease may also present opportunities for investors to borrow at low costs for short-term, high-yield options.
Rachit Pant, CEO of Hedge & Sachs, echoes the sentiment, highlighting how mortgage rates affect buying dynamics, impacting both demand and affordability. Elevated rates can lead to reduced property affordability and may influence buyers to consider alternative locations.
ValuStrat analysts predict that the expected decrease in mortgage rates for 2024 might prompt more buyers to opt for mortgages instead of cash transactions, especially in light of rising rents compared to capital values in Dubai. This shift may be more pronounced in Abu Dhabi, where interest rates could have a more significant impact on property transactions.
ValuStrat analysts also anticipate that renters, particularly those in the lower and mid-price ranges, may consider transitioning to homeownership with a reduction in interest rates. End users seeking ready-to-move-in properties in the Dh1 million to Dh2.5 million price range are expected to comprise a significant portion of buyers benefiting from the mortgage rate drop.
Amid these trends, several factors are emerging in the mortgage market, including tech-driven innovation, PropTech and AI-powered solutions, blockchain integration, Sharia-compliant mortgages, first-time buyer programs, sustainable property financing, lender and product diversification, and a focus on flexible repayment options.
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As the real estate market evolves in response to changing interest rates, government initiatives, and emerging trends, the landscape is set to become more transparent, liquid, and accessible to a diverse range of investors.
