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Dubai on a 14-month mortgage high surge fuelled by low interest rates and a growing population

Properties in the price range of AED 1-3 million were the most sought-after by finance buyers in Dubai, accounting for more than half of all transactions

Dubai on a 14-month mortgage high surge fuelled by low rates and demographics

Dubai’s mortgage sector has been on the climb with May recording a 14-month high in mortgage activity according to the Dubai Land Department data. This marks the second-highest mortgage month on record. One of the main drivers behind this surge is the low interest rates that have allowed borrowing to become more affordable for homebuyers. Additionally, Dubai’s population influx has further fuelled demand. After welcoming over 30,000 new expats so far this year, the city is naturally seeing an overall increase in mortgages as more people look to buy homes.

Based on our May Snapshot Report, Allsopp & Allsopp experienced a surge in mortgage activity, reaching a significant three-year peak. Finance buyers surpassed cash buyers by 55.8 per cent in May, a notable increase from the previous month. Properties in the price range of $272,000 to $816,000 (AED 1-3 million) were the most sought-after by finance buyers, accounting for more than half of all transactions. Following closely behind were properties in the $817,439 to $1,362,398 (AED 3-5 million) price bracket, making up 25 per cent of the market activity.

Top areas with the highest mortgage activity

Downtown Dubai, Jumeirah Village Circle (JVC), Dubai Marina, Jumeirah Lake Towers (JLT), and Jumeirah Beach Residence (JBR) emerged as the most popular areas for apartments based on our recent report. Mortgage buyers in these areas are typically younger individuals who prefer being around popular lifestyles and social hotspots.

Additionally, JVC for example, sees further mortgage activity from investors. As a popular residential community with sustained demand from residents looking for reasonably priced rentals, investors opt to buy units here in the hopes of consistent yields.

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.

As the population matures and starts families, there is a marked shift to villas in suburban areas that offer a strong sense of community and amenities. The increase in mortgage activity in these areas indicates a growing demand for buyers looking for long-term investments, driven by favourable financing conditions and a desire to gain a foothold in a permanent address.

Now is an opportune moment for buyers to capitalise on the current low interest rates. While some banks may make slight adjustments to their rates, it is anticipated that others will lower theirs, ensuring that these favourable conditions persist. The growth in mortgage activity is expected to continue in the upcoming months. There is a noticeable trend in the market towards improved mortgage education, leading to increased engagement. More individuals are now seeking guidance from independent mortgage advisors before approaching their banks, in order to fully comprehend their available options.

In recent years, consumers have shown increased vigilance towards fluctuating interest rates. Consulting with only one bank may not present the most favourable terms for buyers. Mortgage advisors play a crucial role in this scenario by approaching multiple banks to secure the best terms, including perks such as free valuations and more attractive interest rates. Our first-hand experience has demonstrated the significant benefits that this approach can offer to buyers.

In addition to navigating terms, mortgage advisors assist buyers in identifying suitable communities that fulfil their preferences. Oftentimes, clients have a checklist of requirements but may not be familiar with all the neighbourhoods that align with their criteria, particularly with the constant influx of new developments. Through collaborating with a mortgage advisor, buyers often realise they have a wider selection of options than they initially anticipated.