Things To Know For Investing In Dubai Property As A Foreigner

How Fluctuating Mortgage Rates Impacting Real Estate Market In UAE

There Is Always An Impact

When mortgage rates fluctuate there is always an influence on the real estate market. Sometimes those influences trend toward a negative outlook for investors and the economy and sometimes there is a positive outlook.

When it comes to the UAE or Dubai real estate market, mortgage rates are still very low and any fluctuation may not have a deep or long-lasting impact on the real estate sector.

What will happen though is that this trend should tighten up lending requirements and make it more difficult for some home buyers to find mortgage money.

If that happens, home sales may dip which would bring a negative outlook to the economy and the real estate industry.

Strategies For Navigating The UAE Real Estate Market In A Changing Mortgage Rate Climate

1. Reassess Your Mortgage Payment Plan

With many mortgages fixed at 3 to 5 years in this country, the rising mortgage rate needs to be seriously considered. The variable rate mortgages will be the most affected by the fluctuation and you may have to convert to a more stable mortgage.

2. Refinance

This one word says it all. If the outlook for mortgage rates is not going to be good, then it is time to consider refinancing to avoid those higher rates. The downside to this option will be government and other fees, along with the fact some properties will not qualify for refinancing.

3. Stick It Out

Keeping your eyes on the long term is one of the best ways to win the war against fluctuating mortgage rates. Inflationary trends have a way of weeding out the weaker investors who are only looking for short-term gains and have no long-term objectives.

Keeping your eyes on the long term is one of the best ways to win the war against fluctuating mortgage rates. Inflationary trends have a way of weeding out the weaker investors who are only looking for short-term gains and have no long-term objectives.

If you need more strategies talk to our financial advisors. They will help guide you through these times and make success easier to maintain.

The Relationship Between Mortgage Rates and Real Estate Demand

Actually, Dubai and the UAE seem to be anomalies right now. There have been mortgage rate increases over the past year and a half, yet that has not slowed the real estate market in these areas at all.

In fact, mortgage applications have risen and have reached record levels. That may be due to the fact that the current mortgage lending rates are very attractive.

While the original 2.99% interest rates were exceptional, no one can sneeze at the current 5.75% or 6 % rates charged currently. These figures still keep monthly payments low.

Couple that with the high rental yield of between 7 and 10% the mortgage rates are not hurting the real estate industry at this time. The rental income still makes buying homes and getting a mortgage a win for investors.

Then since some banks have been offering special mortgage rate deals, investors are taking advantage of those deals and making more lucrative investments.

The relationship between the two can be boiled down to this, the better the rates, the better the real estate demand.

Effects of Lower Mortgage Rates on Property Affordability

It is common sense to think that the lower the mortgage rates the more affordable the property. That is the correct way to think. While housing prices, homes, villas, and apartments, may rise, it is the mortgage rate that may kill many real estate deals if they are too high.

The bottom line is not the total amount one has to pay for their home but how much one has to pay each month. The mortgage rate affects that payment plan and when the monthly payment gets too high due to high mortgage rates potential home buyers shelve their home-buying plans for later.

Lower mortgage rates mean a lower monthly payment and that makes house buying more affordable and attractive.

Impact on Homebuyer Behavior in Response to Rate Changes

So far, in this area, the rising mortgage rates have not affected home buying by that much. It seems to have a reverse effect as the demand for mortgages has risen to record levels in the past year and a half approx.

Often, and in more normal situations, higher rates tend to cool off the real estate market. However, this is not the case in the UAE or Dubai. If the rates return to a lower level, then you may see even more home buying due to the fact that homes and apartments in this area will be more affordable.

Under normal circumstances, higher mortgage rates would scare first-time buyers and investors away. The higher costs just make it unattractive to buy a home. It is often hard to overcome those higher costs through rental fee increases.

Role of Mortgage Rates in Property Investment Decisions

This is all about the bottom line. Investors are not looking at owning a home to live in till their old age. They are looking at the home or apartment as a money make. They then make their decisions if those locations and home styles will generate enough profit to make buying worth the expense.

One of the factors in those decisions will be mortgage rates. If the investment property will not generate enough income to cover the monthly expense and provide the investor with a profit, they will not buy.

The mortgage rate determines those monthly expenses and if they are lower, then investors have a better chance of recouping their purchase costs and making some money for the future.

Some Additional Words

If you are worried about the rising mortgage rates in the UAE, then call our office today. We have been in the UAE & Dubai real estate market for over ten years and we can help you navigate the mortgage rate minefield.

Our expert agents know the mortgage market and can help you find a good mortgage at a top rate. Even though these rates are rising, they are still very attractive. Call us today and see how our agents can help you get a good real estate investment in this country.

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