Mortgage transaction volumes saw a massive increase in Dubai— reaching nearly 14-month high — despite relatively high interest rates in the UAE even as demand for local property stayed strong.
According to Property Monitor, mortgage transaction volumes increased by 57.9 per cent in May with a total of 3,359 loans recorded – the second highest level trailing only March 2023 as the emirate’s red-hot property continues to grow at a steady pace.
Quoting official data from the Dubai Land Department, Allsopp & Allsopp said Dubai’s mortgage sector has been on the rise, with May recording a 14-month high in mortgage activity, marking the second-highest mortgage month on record.
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“It’s a great time for buyers to take advantage of the low rates. Even if some banks adjust their rates slightly, others will likely lower theirs, which means these favourable conditions should stick around for a while. We expect mortgage activity to keep growing in the coming months,” said Connor Humble, mortgage Services manager at Allsopp and Allsopp.
“We’re seeing a shift in the market towards better mortgage education, which is driving higher activity. More people are approaching independent mortgage advisors before going to their banks to understand their options fully,” said Lewis Allsopp, chairman of Allsopp and Allsopp.
“In the last couple of years, buyers have been more cautious of fluctuating interest rates. If buyers only speak to one bank, they are unlikely to get the best terms. This is where mortgage advisors come in – they go to all the banks and negotiate the best terms, from free valuations to better interest rates. We have seen first-hand how massively beneficial this is for buyers,” said Allsopp.
Interest rates have been peaking in the UAE, but they are expected to go down later this year when the US Federal Reserve will start reducing rates. Since the UAE follows the Fed, rates in the country will also decline.
Allsopp & Allsopp said it recorded a similar heightened demand reaching a significant 3-year high in mortgage activity as finance buyers outpaced cash buyers by 55.8 per cent in May, doubling figures from April.
Allsopp & Allsopp’s May report revealed that mortgage buyers were typically younger individuals who preferred being around popular lifestyles and social hotspots such as Downtown Dubai, Jumeirah Village Circle (JVC), Dubai Marina, Jumeirah Lake Towers (JLT), and Jumeirah Beach Residence (JBR).
For villas, the top areas were The Springs, Arabian Ranches, Town Square, Al Furjan, and Reem.
“We are observing a notable trend of more buyers deciding to move into suburban areas that might not have been on top of their list a few years ago. These areas can be more affordable compared to properties in the city centre with a similar size,” it said.
Property Monitor said loans taken for new purchase money mortgages accounted for 53 per cent of borrowing activity, with the average amount borrowed being Dh1.85 million at a loan-to-value ratio of 76.6 per cent.
Meanwhile, loans for refinancing and equity release saw their market share decrease by 9.5 per cent to 29 per cent. The remaining 18 per cent was due to bulk mortgages — those taken by developers and larger investors with multiple units. The 605 bulk loans issued for the month were spread across several projects, most notably in Jumeirah Village Circle and MBR City.