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The UAE Central Bank followed the example of the US Federal Reserve and successively reduced mortgage interest rates three times during a year, which together amounted to a 0.75% decrease, with many forecasters expecting a further reduction in rates next year.
New borrowers and those who use existing packages with a variable rate on a home loan welcomed the decrease in interest rates, which led to lower monthly payments. Consequently, housing ownership in Dubai becomes cheaper, and potential property buyers can now get more funding at the same monthly costs. This was a welcomed relief for many investors, especially now, when rents for many types of real estate units in the emirate are declining.
The decrease in interest rates occurred simultaneously with the for issuing mortgage loans in the UAE. Now, borrowers are allowed to extend the mortgage until they are 70 years old, which means that many will be able to significantly reduce their monthly payments.
Another innovation this year was the limitation of bank fines for early mortgages, which allowed many borrowers to change their bank lender and choose another one with a better offer on mortgages.
The revision of loan-to-value (LTV) ratio remains the subject of wider discussion. High deposit rules act as a barrier preventing many potential buyers from entering the real estate market. On the other hand, many experts believe that such careful practice is useful to limit the number of loans and helps mitigate negative situations. In addition, high deposit requirements help to avoid rash decisions.
Lower loan rates and more flexible mortgage rules are likely to be an incentive for the UAE real estate market in the nearest future, experts predict. It is expected that the US Federal Reserve will continue to soften interest rates that stimulate economic growth in 2020, and the UAE dirham, pegged to the US dollar, respectively, will also enable banks .
A research company ValuStrat recently revealed that overall sales increased significantly in the Dubai residential property market in recent quarters — an interesting barometer that reflects improved market sentiment.
The developers, for their part, won’t wait for banks to help, assuming their functions or working in coherence. For example, Emaar, together with Dubai Islamic Bank, is developing new financing solutions that are designed to help investors achieve investment returns of up to 10 per cent minimum. This primarily refers to real estate units in the new communities that Emaar is developing in areas such as , , and . When buying properties in these communities clients will pay 50 per cent of the housing cost during the construction phase, and the remaining 50 per cent can be paid in installments during a period of 25 years with a zero loan rate for the first five years.
According to estimates by Emaar experts, in this case, monthly payments will amount to less than 40 per cent of the .
And other developers even set up special mortgage departments to provide better service in this particular segment. For example, Damac's mortgage assistance system allows customers to approve an apartment loan after a short appraisal process, while Binghatti Developers holds a promotion in Mashreq Bank, offering mortgage approval for 10 minutes for those who have no loan obligations.
And finally, the ratio of the number of mortgages to real estate sales generally reflects the direction of the market. In a mature market, this ratio is about 85 per cent. And in the UAE, this ratio doubled from 28 per cent in 2010 to about 60 per cent approaching a healthy indicator.
Thus, if you still doubt that buying property in Dubai can be better than renting, contact our specialists at IMEX Real Estate. They will help you calculate the real interest rate and the amount of monthly payments in your particular case, if you decide to purchase an off-plan housing through our agency. In addition, thanks to cooperation with most of the major developers in Dubai, we are the first to learn about the most favorable conditions for payments and sales of the off-plan units in the newest projects.
To always stay up to date with the latest analytics data and real estate prices in Dubai, subscribe to our newsletter using the form below. And in order to sell, lease or buy/ rent housing or commercial properties in Dubai, contact IMEX Real Estate. Our contacts:
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IMEX REAL ESTATE BROKER LLC, UAE
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Email: pm@IMEXre.com
