Dubai: With more mortgage rate hikes a reality, developers in Dubai are offering straight discounts or offering property buyers the option to extend their payment period after the unit is handed over. Because trends suggest that end-user buying could drop significantly in the weeks ahead as potential owners fret over higher mortgage costs.
Some developers are starting to offer 15-20 per cent discount on the property value for signing up to an offplan purchase. But down payments too will need to be higher, at typically 30 per cent upfront. “Dubai property market needs both its cash buyers as well end-users, who typically need a mortgage to finance those deals,” said a developer. “Banks are constrained in offering incentives, but as developers there is greater flexibility that can be offered on payment terms.”
Already, during May, there was a 12.6 per cent drop in the number of mortgage-backed transactions – at 1,706 units sold – compared with a year ago. It was in May that the US Fed went in for a second interest rate hike – by 0.50 per cent – and which was immediately reflected in new mortgage rates in the UAE. Last week, another 0.75 per cent was added on top of that.
Ready villa demand
Through the better part of two years, it was end-users who were driving the property markets turnaround, starting with demand for villas and then extending that to bigger apartment premises. Even as Dubai was notching up sales of Dh100 million and over homes, there was sustained demand for apartments in the Dh2 million to Dh5 million range from end-users.
This is why May’s data shows more warning signs of cooling end-user demand. Ready villa sales lagged by 35 per cent during the month while all other categories outperformed. The slackness in ready villa demand could also be because sellers are now starting to ask much higher than what the market can support. (Average ready villa deals were at Dh3.4 million last month, according to the DXBInteract.com data.)
The other way potential homeowners could counter mortgage hikes is search out developers willing to give extended post-handover payment plans, ideally of three- to five- years.
Offplan launches are in a big comeback mode, with Damac, Danube and Deyaar all having announced new ones in recent days. There are also more releases from Emaar and Meraas – but the big freehold moment was the Guinness World Record holder One Za’abeel launching sales for the residential part of its twin-tower. Prices start at Dh3.9 million. Booking can be made by putting up 5 per cent.