Dubai real estate breaks the mortgage-versus-buy rule

Ismail Al Hammadi

04 October 2022

Real estate loans in the local real estate sector were affected during the current year, after the interest rate was raised in the country based on the decision of the US Federal Reserve, as one of the measures taken by international banks to reduce the rate of inflation, and it was expected for the real estate sector to record a decline in activity and a decrease in the rate of inflation. The number and value of sales and even the projects offered, as is the case for the global real estate markets that recorded the highest decline in real estate sales according to market studies, including Canada, the United States and China, due to the decline in demand for real estate loans by customers, as the real estate market in America slowed according to Recent reports in the number of sales of homes and homes under construction and a decline in building permits more than expected during the past months of the year.

The real estate finance sector, which played an important role in recent years in revitalizing the Dubai real estate market, did not affect its activity this year, which confirms that the sector is no longer subject to this mechanism and relies on it as much as it was before, as the market had previously recorded an increase in value Mortgages against sales, in an equation that reflects the strength of the financing link to sales activity. During the past nine months of the current year, Dubai recorded more than 83 billion dirhams, the value of real estate mortgages, and more than 183.6 billion dirhams of sales.

In the same period in 2021, the market recorded 98.1 billion dirhams of mortgage value, compared to 102.6 billion dirhams of sales.

During these two periods, the market recorded a value of mortgages less than sales, in contrast to the same periods in previous years, where the market recorded in 2020 the value of mortgages 66.1 billion dirhams, compared to 48.6 billion sales value.

In 2019 and 2018, the market recorded 84.8 billion dirhams of mortgages, compared to 54.5 billion and 55.8 billion in sales.

The sector also witnessed the registration of 94.7 billion dirhams worth of mortgages in 2017, compared to 88.1 billion sales, and 81.3 billion dirhams in 2016, compared to 74.9 billion sales.

And if we make a comparison during these years that we touched upon, we will find that the value of mortgages is higher than sales, as at that time the purchase was dependent on more than 50% of loans and real estate financing, the exact opposite of what we see during the current year, more sales value compared to less mortgages, in addition to A greater number of new projects were launched, which confirms the strength of the real estate sector this year and its breaking of the mortgage-for-purchase rule.

This strength is derived from the strength of the financial solvency of investors and buyers, which gave a strong impetus to the purchase of real estate, and provides financial liquidity to launch more projects in the market.

In this case, it can be said that the sector was not affected by the rise in interest rates, as it is based on a real customer base led by buyers and investors from the category of wealthy customers, in light of the faltering of other global markets.

Any real estate market in which you find more sales value and less mortgages, it is a strong market and is heading towards an upward growth in the future thanks to the strength of its customers, and this is what it is currently the Dubai real estate market, where it can be said that the market today has regained its right track after years of price correction and was able to build a base Solid real estate customers help it to continue growing in the future, and to continue the upward trend of real estate activity, ignoring the adverse effects of high interest rates on real estate financing.

During the nine months of 2022, Dubai recorded more than 83 billion dirhams in mortgages, and more than 183.6 billion dirhams in sales.

@ismailalhammadi

Ismail.alhammadi@alruwad.ae

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