When rent increases have hit 20-30 per cent plus, potential buyers are taking a closer look at their options. (According to CBRE, at the half-year mark, Dubai’s rentals gains were averaging close to 25 per cent while property values were up 9 per cent.)
There is another reason why the payment periods are being extended by developers. Since local mortgage rates went through successive 0.75 per cent rate hikes, there has been a drop in mortgage-backed sales. And that essentially means end-user buyers feel it’s getting too pricey to think of buying a home now, with property values also increasing quite significantly.
“The property market needs end-users to remain interested,” said a developer who has just brought down the down payment and extended the payback period to 5 years from three on a newly completed project. “Yes, offplan sales are back to dominating transactions in Dubai, but those are mostly investors buying or those interested in the Golden Visa programmes and not in a hurry for a property to stay in.”
This week, the US Fed will serve up a third sizeable rate increase, which will be mirrored in local lending rates. The Dubai and UAE property market has through recent rate increases not just sustained the sales tempo, but saw the best summer in more than a decade. But developers know they still have to do their part – and newly delivered homes are part of that plan.
A look at recent property offers show clear trends emerge. Whether in JVC or MBR City, the developers are focusing on longer payment plans and smaller down payments.
“We find that end-user buyers are turning more towards new/ready homes than offplan,” said an estate agent. “Their immediate concern is to find an alternate to paying rents. Ready homes serve that purpose.
“It’s in the mid-market that we are seeing these buyers coming in, for properties priced around Dh750,000 to Dh1.2 million. These buyers were paying Dh50,000-Dh75,000 as annual rents and were probably looking at 15-20 per cent increases on their leases.”
More of such buyers are what Dubai developers will be focussing on.
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