KHALEEJ TIMES, Wednesday, Jul 28, 2021 | Zul Hijjah 18, 1442
Dubai mortgage deals surge 91% in H1 on back of lending reforms, rise in end-users
Emirates:
Mortgage transactions in Dubai recorded a 91 per cent increase between
second half of 2020 and first half of 2021, underscoring the strong rebound in
realty market as well as the sustained trend in low interest and the
availability of competitive mortgage products.
Mortgage Finder, an independent mortgage consultancy and part of the Property
Finder Group, said in its report that in the first half of 2021, 40 per cent of
all sales transactions in Dubai were completed with a mortgage.
Ian Vaughan, senior mortgage consultant at Mortgage Finder, said there had been
a significant uptick in demand in the first half, “which is really positive news
and indicates more people are reaching the goal of owning their own home in
Dubai.”
Vaughan attributed the increase in activity in the market, in part, to the major
reform in lending policy introduced by the Central bank of the UAE in early
2020, which allowed banks to lend 5.0 per cent more, reducing the down payment
requirement for first-time buyers from 25 per cent to 20 per cent. “This change
has made getting a mortgage more accessible for some people.”
The average mortgage (loan) amount increased by 24 per cent from H2 2020 to H1
2021, with the average mortgage size in the first half of 2021 sitting at Dh 2.2
million.
According to the Dubai Land Department (DLD), the value of mortgages recorded in
the emirate reached 20.9 billion in January 2021, the highest since October
2016. Total sales for the month also hit Dh29.4 billion, the highest since
January 2018.
The data highlighted that the property market in Dubai remains resilient and
continues to generate investor interest despite the coronavirus pandemic.
Dubai’s property market had been under pressure prior to the Covid-19 pandemic,
owing to the supply glut in the market. Prices and rents fell further after the
pandemic took a heavy toll on the economy.
The last few months of 2020, however, had seen more buyers taking advantage of
the low prices, prompting analysts to predict that the market is stabilising.
Mortgage Finder report noted that there was an almost 50/50 split in mortgage
transactions for villa/townhouses and apartments, with the villa/townhouse
segment coming in slightly higher at 55 per cent. Separately, research from Data
Finder showed that in the first half of this year overall sales transactions in
the villa/townhouse segment accounted for 27.5 per cent, whilst apartments were
72.5 per cent.
“There has been a lot of interest from borrowers wanting to purchase
villas/townhouses, with many of them citing the need for more space as the main
reason
The research from Data Finder, coupled with our knowledge on the 50/50 split in
completed mortgages for the same segments, suggests that more apartments are
being purchased with cash than villa/townhouses. This makes sense given that
villa/townhouses tend to be more expensive and the prices of those in prime
areas of Dubai have seen notable increases of late. Furthermore, cash buyers
often tend to be investors and apartments are generally more favourable for
investment purposes,” Vaughan said.
Banks have continued to offer competitive mortgage products and terms, with
interest rates remaining at record lows. It is possible to find mortgage rates
available now from just 1.99 per cent, compared to 2.49 per cent in the middle
of 2020.
“Banks in the UAE are open for business. Many are currently offering great
headline mortgage rates to entice borrowers, with some going further and being
more flexible in their lending criteria depending on the borrower profile. This
is great news for potential buyers, but it also means they need to ensure they
do their research and understand the full terms of the mortgage before signing
on the dotted line. In essence, it’s more important now for borrowers to shop
around and see past just the headline rate to look at the mortgage product as a
whole and make sure they are getting the right deal,” said Vaughan.