Dubai real estate market Q2 2023 - Rising mortgage rates and their impact

    Already we are in the third quarter of 2023. We look back on a turbulent second quarter characterized by growth. Here is a summary and assessment of the market:

    According to Dubai Land Department figures, nearly 30,000 real estate transactions took place in the second quarter, an increase of over 35% compared to the second quarter of 2022. The total value of sales was AED 91 billion, an increase of over 54%. This means prices have risen above everything else.

    We observe that despite the massive increase in interest rates - over 6% mortgage rates today - the number of transactions with financing has grown by 38%. We suspect this is due to the sharp increases in rents. For many tenants who have some equity, a property purchase is now an option.

    Accordingly, transactions in the residential market have increased by almost 60%. Dubai Marina was clearly the area with the highest sales. The off-plan residential market grew only moderately at 5%. Jumeirah Village Circle was the neighborhood with the most transactions here. Sales of villas decreased by 9% at a high level. This was the case for both existing properties and off-plan transactions.

    For the overall market, we see demand remaining robust and likely to continue deep into 2024.

    Population growth, tourism, tax-free conditions and of course the current geopolitical situation are the main drivers of this development.

    In the off-plan market, demand is additionally fueled by attractive payment plans. Buying an off-plan apartment is straightforward and simple - pick an apartment, tap in a credit card, make a reservation payment, and poof, you're soon the owner of an apartment. The entry hurdle for an off-plan purchase is low with a reservation payment of 10% and the risk is manageable at first glance. However, many investors buy an off-plan property with the idea of selling the property at a higher price before completion and with a minimal down payment. Such investments or speculations are risky and should only be entered into if the property is held, respectively if sufficient financial means are available to afford the entire purchase sum. If prices do not increase or even decrease, one should not be forced to sell the property. Renting is and remains a more than reasonable option that promises an attractive return on equity.

    Especially in the current situation, it has become even more important to carefully consider a real estate investment and to be aware of possible future risks.

    We are happy to support you in the search and analysis of a suitable real estate investment in Dubai.

    Your Terra Nova Real Estate Team