According to Morgan’s International Realty, a luxury real estate brokerage and firm, mortgage activity in the Dubai real estate sector is anticipated to be hindered in the upcoming months as a result of the US Federal Reserve’s intentions to quickly raise interest rates.
“The mortgage market will inevitably be influenced by these reforms, which are implemented to combat inflation,” Elias Hannoush, Managing Director, Morgan’s International Realty, said in the report.
Mortgage transactions registered 4,820 deals in Q2 2022 compared to 4,764 deals in Q2 2021, remaining constant year over year. However, compared to Q1 2022’s 4,415, the numbers have somewhat increased from quarter to quarter. Contrarily, cash transactions decreased 20.5 percent to 8,611 in Q2 2022 from 10,833 in the same quarter the previous year.
“The mortgage transactions remained constant despite recent interest rate hikes announced by the Central Bank of the UAE,” Hannoush said, adding that existing investors and new property purchasers have rushed to secure financing during the quarter at the present rates.
The majority of borrowers chose a fixed-rate structure to avoid future rate increases that may be necessary to combat rising global inflation.
To counteract the negative effects of mortgage borrowing power and the US dollar’s strength relative to other major currencies, positive elements like foreign direct investment, a growing population, and government efforts boost long-term growth.
In the second quarter of 2022, total sales in the primary and secondary markets increased significantly, reaching AED 18.55 billion and AED 40.45 billion, respectively.
According to the survey, an increase in millionaire migration to Dubai was evident in the performance of the residential luxury property (AED 10 million and above) and ultra-luxury property ($10 million and above) segments.
Transaction value climbed by 141 percent while the number of transactions over AED 10 million increased by 113% on a yearly basis. The real estate market for ultra-luxury properties increased by 50% quarterly and 28% annually.
“In light of the global political and economic climate, we anticipate that Dubai will attract a greater number of ultra-high-net-worth individuals, resulting in a robust performance of the luxury market sector through 2022 and beyond,” Hannoush said.