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UAE banks' interest rates on mortgages have been raised again. The decision was made on March 22. The rate has been increased by 0.25%. This is the ninth increase since February 2022. A real estate loan is available for 6% per annum. The interest rate is equivalent to the return on investment in most of the emirate's real estate, but the measures taken by the financial sector do not stop the growing demand. Most of the buyers are Russians and CIS citizens. When buying real estate in the United Arab Emirates, according to their legislation, up to 50% of the cost is covered by mortgage loans.
Among Russian buyers, the Dubai real estate market is considered the best opportunity to save their money. After the beginning of the Ukrainian conflict, the real estate value increase here was 12.4%. The figure was published by the well-known British agency Savills as part of the analytical report Prime Residential World Cities Index. The company’s experts track real estate prices in the world’s 30 largest cities. According to the published results, Dubai is the leader of the index. Singapore showed a significant growth. The remaining megacities kept the usual values of 3.2%.
Comparing the beginning of 2023 with the same period of 2022, analysts say that the number of applications for mortgage loans has increased by 40%. Early this year, this figure was 20%. Most borrowers choose properties at a lower cost of AED 1.5 million ($408,435). In total, the Dubai market made 16,700 credit transactions in 2022. Total sales were over 90,000. This is a record for the UAE.
The growth in mortgage rates makes it unprofitable to purchase real estate for renting it out. According to Savills research, rental prices have increased by 22.9%, but this phenomenon is temporary, and the market will stabilize by 2024 returning to the usual 5.9% per annum. By attracting a mortgage loan of 6%, it will be possible to pay it off through tenants, but it will be impossible to profit.
The frenzied rate of price growth in 2022 is slowing down. Experts note a monthly growth of 0.58% in February. Since last July, this has become the lowest figure. As a result, half of the housing was bought out at the construction stage. The cost per square metre is equal to the level of 2013 and is AED 11,857 ($3,228). There were 9,128 transactions, which is 8.2% less than in January. Nevertheless, this February has become the sales leader of all the Feb's on record. The record of the second month of 2022 was broken by 43.8%. It should be noted that there are many speculative real estate resale transactions. These sales account for a third of all contracts concluded. Experts warn that a multiple increase in the value of real estate through speculative sales may result in multiple inflated prices for the end buyer inconsistent with the real value of the property.
