The increase in LTV by 5 per cent for first-time buyers in the UAE have made it easy for them to enter the market Image Credit: GN Archives

Although there was a slowdown in performance at the beginning of the year in the UAE, the second half saw a revival of activity as lockdown measures eased and pent-up demand filtered through the residential market in both Abu Dhabi and Dubai. The Property Monitor monthly market report for December indicates transaction volumes could well maintain their upward momentum as long as quality and well-priced ready inventory is available to fulfill strong buyer demand. In December, transaction volumes stood at 3,772, which represents a strong year-on-year increase of 25.5 per cent compared to December 2019. Completed property transactions continued to outperform off-plan with title deed transactions accounting for 64.7 per cent of sales in December. Over the past seven months, off-plan sales have declined, partly because of fewer new launches by developers, increased buyer preferences for ready homes and higher initial developer sales in completed properties. Resale transactions—subsequent sales of a property once purchased from the developer — reached 41.1 per cent of the total market in December, which was well above the 12-month average of 33.2 per cent. “These trends signal the market achieving a certain maturity where end-user and investment demand drives activity rather than speculation,” says Zhann Jochinke, COO, Property Monitor.

Mortgage transactions

The report also highlights that mortgage transactions hit a record high in December with 2,192 loans recorded, comprising initial mortgages as well as refinancing. “Mortgage activity grew a robust 25.1 per cent on a monthly basis, and year-on-year mortgage volumes rose by an impressive 65.1 per cent. And although 30 per cent of loans issued in December were for bulk developer mortgages and bulk refinancing, 70 per cent of mortgages were still driven by end users, particularly purchasing and refinancing in the villa and townhouse segments,” says Jochinke. Most notable bulk mortgages were for Barcelo Residences in Dubai Marina, Vezul Residence in Business Bay, Al Hassen Residence in Dubai Industrial City, Building N-05 Persian Cluster International City, and The 8 and Five Palm Jumeirah on The Palm.

Shiv Gupta, co-founder of MyMoneySouq, a marketplace for personal financial products in the UAE, says property price per square feet dropped from 1.1 per cent - 5.5 per cent in the third quarter of 2020. This captured the interest of property buyers and increased the demand when compared to the second quarter of last year.

Low down payments

During the Covid-19 pandemic, to lessen the financial burden on residents, the Central Bank of the UAE announced several support measures. These include an increase in the Loan to Value (LTV) by 5 per cent for first-time buyers in the UAE. The decree that applied to both the UAE Nationals and expats, says expats can now borrow up to 80 per cent of the property value as the home loan amount. UAE nationals can borrow up to 85 per cent of the property value. This regulation makes it easy for first-time buyers in the UAE to buy a property as they need to invest only 15 per cent – 20 per cent of the property value as a down payment. Currently, the mortgage rates in the UAE start at 2.49 per cent. “Along with the low interest rates, banks in the UAE have also offered payment holidays for loan holders to reduce the financial burden. Some banks have offered 50 per cent or 100 per cent processing fee waiver. “The reduced down payment along with a reduction in processing fee makes the purchase deal much sweeter,” says Gupta.