Dubai: The concept of renting and hopping from one apartment to another has become unrealistic for some tenants in Dubai and many are now warming to the idea of owning a home.
Property experts in the UAE have observed a change in attitude towards home ownership and say this shift is driven primarily by rising rents and easier mortgage terms.
Residential rents have been rising recently, owing to the recovery of the real estate market. During the first six months of the year, rental values across Dubai went up by 11.3 per cent.
As a result, more residents are “considering the option of making the transition to property ownership”, according to Faisal Durrani, associate, Cluttons research. “There are a number of drivers for this, primarily favourable lending rates and as a way to avoid being caught out by further advances in rental values across Dubai,” Durrani told Gulf News.
Interest rates on mortgages in Dubai have dropped over the last three to four years from 9 per cent to 4.5 per cent per year. Banks are also offering other incentives to would-be homeowners, such as discounts on processing and valuation fees, and reduced interest rate during the first year.
Switching between loans
“As a matter of fact, people who got a mortgage in 2008 to 2009 can benefit significantly by switching to cheaper loans,” said Preeti Bhambri, managing director and founder of Moneycamel.com. Bhambri said rates have been falling primarily due to the lower cost of funds and a stable environment. The competition among banks is another factor that has led to better mortgage conditions.
“The excess liquidity that banks have been enjoying for the last few years has pushed the cost of funds down. On account of a better regulated property market, where mortgages are available only for ready properties, banks now face a lower risk and hence charge a lower risk premium,” she said.
Dubai’s real estate sector, which was impaired during the global recession, has started to recover recently amid increased money inflows and high oil prices. The UAE’s political stability during the Arab Spring has helped attract foreign capital to the country.
According to Durrani, property buyers in Dubai are still mixed, with the proportion of first-time buyers, GCC nationals and smaller investors looking to own properties to let remaining largely unchanged. “Furthermore, Dubai’s perceived safe haven status continues to drive inward investment into bricks and mortar, as investors shy away from some of the more troubled areas across the broader region,” Durrani added.
Buyers are largely interested in owning properties in premium locations such as Dubai Marina, Downtown Dubai and Emirates Living. Other “centrally located submarkets” like Business Bay are also seeing an “upturn in buyer interest”.
Development of Business Bay
“The infrastructure in Business Bay has come a long way over the past 12 months, particularly in the strip closest to Shaikh Zayed road. In addition, with direct access to Downtown Dubai and more residential schemes starting to get handed over, we are starting to see the birth of a new community, which is expected to spur further interest in this submarket,” said Durrani.
As of the second quarter of the year, apartments in Dubai Marina cost Dh1,317 per square foot (sq. ft). Emirates Living villas were a little bit more expensive, at Dh1,409 per sq ft. In Business Bay, flats were more affordable, selling at Dh858 per sq. ft.
