The UAE is set to experience interest rate reductions in 2024, pending US Federal Reserve rate cuts. Despite the market’s strong performance, concerns about mortgage buyers’ purchasing power have been raised. Mortgage buyers are expected to regain a competitive edge, causing tenants to weigh purchasing a property or renting.
Property buyers in the UAE are predicted to shift to mortgages in 2024 as interest rates fall by up to 100 basis points. Real estate specialists emphasize the substantial impact of fluctuating mortgage rates on buyer behavior, emphasizing the possibility of renters shifting to property ownership as rental prices in the UAE continue to rise.
Cash transactions dominate the Dubai real estate market, with mortgage transactions accounting for a smaller share. Whereas Abu Dhabi shows a different pattern, with mortgage transactions being of greater significance. The prospect of lower interest rates in 2024 may contribute to an increase in the number of buyers favoring mortgages, particularly renters considering a move towards property ownership.
This shift may be more prominent in Abu Dhabi than in Dubai, where cash transactions are often seen. The anticipated fall in interest rates is likely to have a significant influence on property transactions, particularly among tenants and clients looking for more affordable options.
The slightest decrease in mortgage rates might dramatically increase the number of potential homebuyers in the UAE. This increased affordability is expected to attract client who previously found the market less accessible. In addition, it allows investors to borrow at reduced rates for short-term investments in potentially high-yielding options.
Mortgage rates have a substantial impact on property acquisition dynamics, influencing affordability as well as demand. Elevated rates could reduce property affordability and lead purchasers to consider less desirable locations. Higher interest rates may limit the maximum loan amount for which buyers qualify, posing a challenge for some buyers, particularly those with lower incomes or smaller down payments.
Rents are increasing faster than capital values, making mortgage options attractive, particularly in the low and mid-priced property segments.
The majority of buyers taking advantage of the decline in mortgage rates are projected to be individuals looking for ready-to-move-in properties in the lower price segment, so lower interest rates provide a favorable scenario for individuals considering homeownership over renting.
