Dubai property buyers are increasingly opting for mortgages over cash as interest rates in the UAE and globally have decreased. Property brokerage firm Betterhomes reports a notable shift in buyer demographics compared to last year, when cash buyers were the dominant force in the market. During the third quarter of 2024, over 60% of Betterhomes' buyers chose mortgages as their primary home financing method, marking an 8% year-on-year increase in mortgage usage.
"The rise in mortgage buyers can be linked to Dubai's comparatively low interest rates relative to other global cities. As central banks in various regions have begun to lower rates due to easing inflation, making borrowing more accessible, Dubai's rates have remained attractive," Betterhomes stated in its quarterly report released on Thursday.
"Mortgage buyers saw a significant boost in September with a 0.5% drop in interest rates, the first such cut in over four years. The reduction in mortgage costs, coupled with rising rents, has naturally led to a surge in new buyer inquiries from tenants," explained Richard Waind, CEO of Betterhomes.
According to Betterhomes' Future of Living Survey, nearly 70% of tenants in Dubai aim to purchase a home within the next three years. "A lower interest rate environment will bolster this aspiration," Waind noted.
"We're witnessing a market shift towards enhanced mortgage education, driving increased activity. More individuals are consulting independent mortgage advisors before approaching banks to fully understand their options," said Lewis Allsopp, chairman of Allsopp and Allsopp.
In alignment with the US Federal Reserve's decision, the Central Bank of the UAE reduced the Base Rate applicable to the Overnight Deposit Facility (ODF) by 50 basis points last month, from 5.40% to 4.90%. This reduction translates to lower interest rates for UAE consumers on personal loans, mortgages, and auto loans, stimulating economic activity as more people and businesses seek loans for expansion and new ventures.
Analysts anticipate the Fed will continue to ease monetary policy, with further rate cuts expected later this year and in 2025. Property Finder, a Cavendish Maxwell subsidiary, suggests that as mortgage rates decline and potential buyers gain more purchasing power, ready properties could experience increased activity. However, this hinges on sellers pricing their properties accurately and not exploiting the situation with aggressive pricing strategies.
In August, loans taken for new purchase money mortgages accounted for 51.3% of borrowing activity, down 1.7% from the previous month, with the average amount borrowed at Dh1.77 million.
