Out of the box

The first half of the current real estate year... and the challenges of the second half

Ismail Al Hammadi

06 July 2022

A record rise in sales, the injection of more new projects, and new restrictions on real estate loans... A summary of the scenario for the first half of this year for the real estate sector in Dubai.

So far, the real estate sector in Dubai has achieved more than 114.5 billion dirhams, the value of real estate sales, compared to only 61 billion dirhams during the same period in 2021, and 31.4 billion dirhams in 2020.

The value reflects the volume of activity in the first half of the current year 2022, as this value has not been achieved since the inception of the market.

I browsed the "Dubai Rest" website, to verify the values ​​achieved in previous years, from the first half of 2010 until the first half of 2021, to find that the value of real estate sales for the half year did not exceed the ceiling of 74 billion dirhams, as it was the largest value of sales achieved. In this period in the first half of 2014, when the market achieved 73.9 billion dirhams as the highest value since 2010 until 2021.

But the current half of the year 2022 broke all these numbers, so that the value of real estate sales achieved in it became the highest half-value in 13 years, and the largest of its kind, in light of critical global economic and political bets and challenges that the world is going through.

What distinguished the first half of this year was the decline in the value of mortgages, as it did not exceed 43 billion dirhams, compared to 70.6 billion dirhams during the same period last year.

Mortgages witnessed a sharp decline in the market during: April, May, and June, due to investors' fears of interest rates, which will rise to 1.25% at the beginning of July.

Fears that result from other concerns that may affect the value of real estate sales for the second half of 2022, as it is undeniable that the volume of mortgages that were registered in 2021 with a value of 128.8 billion dirhams as the highest annual mortgage value in the real estate sector, had a great credit for the value of real estate sales in the market for the first half of this year.

At this point, the magnitude of the impact of the real estate finance factor on the sales market emerges. If the value of loans increases, the sale increases with it, and vice versa if it declines. Why?

Because the final financing or loan value, with its fees and interest rates, is included in the total cost of purchasing the property, and with this mechanism, buyers in the market calculate it.

It is no secret to everyone that real estate prices have risen compared to previous periods, and add to them the increase in mortgage interest rates. Will this affect the buyer's budget or not?!

Logically: it affects, and this may expose a lot of people to withdraw and cancel the purchase decision, even temporarily, and this is a result that we do not want the market to reach.

We do not want withdrawals from the market, and we do not want to postpone purchase decisions. There are a large number of projects that have been put on the market this year, and we do not want them to accumulate, and for the sector to suffer from a glut that it soon got rid of.

The decision to raise interest rates on loans is a global decision, but there are several internal solutions that can be adopted to avoid an expected negative outcome.

The market today is in an advanced stage where there is no room for retreat, and those concerned should lay a protectionist pillar to consolidate this progress and attract more investors.

 To read the previous articles of the writer please click on its name. 

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