Dubai property: 40% of all sales involved mortgage

Dubai’s mortgage market is showing signs of recovery with the number of completed mortgages having doubled between H2 2020 and H1 2021, said consultancy firm Mortgage Finder.

The consultancy firm, which is part of the Property Finder Group, said that 40 percent of all sales transactions in Dubai involved a mortgage.

“The increase in activity in the market can definitely be attributed, 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 percent more, reducing the down payment requirement for first-time buyers from 25 percent to 20 percent. This change has made getting a mortgage more accessible for some people,” said Ian Vaughan, a senior mortgage consultant at Mortgage Finder.

The average mortgage amount increased by 24 percent from H2-2020 to H1-2021, with the average mortgage size in the first half of 2021 valued at 2.2 million dirhams ($600,000).

There was near 50/50 split in mortgage transactions for villa/townhouses and apartments, with the villa/townhouse segment coming in slightly higher at 55 percent, the report said. Separately, research from Data Finder, an associate company, showed that in the first half of this year overall sales transactions in the villa/townhouse segment accounted for 27.5 percent, whilst apartments were 72.5 percent.

“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.

According to Vaughan, the data 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 price 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,” he said.

With banks offering competitive mortgage products and terms, interest rates are at record lows, the report said. “It is possible to find mortgage rates available now from just 1.99 percent, compared to 2.49 percent in the middle of 2020.”

Dubai’s property market which had been under pressure even before the COVID-19 pandemic, due to oversupply in the market, fell further as the pandemic took a heavy toll on the economy. The last few months, however, had seen more buyers taking advantage of the low prices, prompting analysts to predict that the market is stabilising.