Mortgage Market Update – September 2014

The introduction of a Central Bank mortgage cap and increase in Dubai Land Department fees from 2% up to 4% late last year, have taken the steam out of the UAE property market.


House prices have been softening all year and after a slow summer, sellers are starting to reduce asking prices. This is good news for prospective buyers, particularly as rental prices have continued to surge over this period.


Our forecasted adjustment in property prices need not be a cause for concern, unless you have to sell quickly of course. We forecast only a mild correction in property prices this year as there are still a number of positive fundamentals, which bode well over the medium term. The market was over inflated in 2008 by speculators and investors transacting mainly under construction properties. Today, the majority of transactions are for completed properties or projects close to handover. There are many more end-users and interest rates have dropped by over 50% from 8% to under 4%. Instability in the wider region is also accelerating growth in the population.


We have over 30 banks actively lending in the market and most offer competitive products with greater transparency. The Central Bank regulation of 28th December 2013 was not solely intended to reduce maximum lending levels (Loan to Value) by the banks. It also introduced more stringent rules of assessing eligibility and restrictions on maximum exit fee penalties banks could charge customers. This has created far better value mortgage products for consumers.


Is it the right time to buy? Well, this can only be answered once you have assessed your financial position and future plans in detail. If you are in stable employment and intend to remain living in the UAE for a minimum period of 3-5 years, most definitely. It is likely that we will experience some volatility leading up to 2020 but highly probable that property prices will be higher than today.


A typical 3-bedroom villa (Saheel or Savannah style) at the Arabian Ranches development will rent today for circa AED250,000 per annum. Buying the same property with a 75% mortgage will cost as little as AED16,150 per month (AED193,800 per annum).


A typical 2-bedroom Shoreline apartment on Palm Jumeirah will rent for approximately AED 180,000 per annum. Buying the same property with a 75% mortgage will cost as little as AED9,543 per month (AED114,516 per annum).


Even after factoring in service fees, buyers can significantly reduce their outgoings, compared to tenants. To find out how much you can save by buying instead of renting, contact us today on for a free consultation.


Article written by; Jean-Luc Desbois, Managing Director, Home Matters

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