Property buyers in Dubai are increasingly opting for mortgages over cash, driven by decreasing interest rates both locally and globally. According to Betterhomes, a leading property brokerage, over 60% of buyers in the third quarter of 2024 chose mortgages as their primary financing method, reflecting an 8% year-on-year increase in mortgage usage. This shift marks a significant change from the previous year when cash buyers dominated the market.
Impact of Interest Rate Cuts
The recent 0.5% drop in interest rates—the first cut in over four years—has provided a welcome boost to mortgage buyers. Richard Waind, CEO of Betterhomes, noted that this reduction, combined with rising rents, has led to a surge in inquiries from tenants looking to transition to homeownership. The competitive interest rates in Dubai compared to other global cities have made borrowing more attractive, further encouraging this trend.
Tenant Aspirations and Market Dynamics
A survey by Betterhomes revealed that 67% of tenants in Dubai wish to purchase a home within the next three years. This desire is supported by the current lower interest rate environment, which is expected to facilitate more buyers entering the market. Additionally, there is a growing emphasis on mortgage education, with more individuals consulting independent mortgage advisors to explore their options before approaching banks.
Economic Stimulus from Lower Rates
In line with the US Federal Reserve’s recent decisions, the Central Bank of the UAE has cut its Base Rate, resulting in lower borrowing costs for personal loans and mortgages. Analysts predict that further rate cuts may occur later this year and into 2025, potentially boosting economic activity as consumers and businesses seek loans for expansion.
Future Market Trends
As mortgage rates continue to decline, Property Finder anticipates increased activity in ready properties. However, this will depend on sellers pricing their properties appropriately rather than taking advantage of the situation with aggressive pricing strategies. In August 2024, loans for new purchase money mortgages accounted for 51.3% of borrowing activity, indicating a robust trend towards mortgage financing in Dubai’s real estate market.
