After COVID-19, UAE property market is expected to recover in phases – Time now to buy a home?
Low prices, interest rates and favourable loan-to-value ratio make it a buyer’s market
The COVID-19 pandemic has been causing disruption across most industries and the UAE’s real estate market is expected to face strong headwinds in the near term. Given the uncertainty around the current situation, market stakeholders are finding it hard to predict when property investment activity will return to Dubai. If the pandemic has a sustained and long-drawn impact on the broader UAE economy, it will have a cascading effect on the property market as well. The current lockdown has caused most activity to come to a halt in the short term, but property transactions are expected to gain momentum once restrictions are lifted.
If you are a prospective house buyer in the market, all things are going in your favour now. Low mortgage interest rates, higher LTVs (loan to value), reduced service charges and attractive valuations make for a win-win situation. But with the UAE seeing rampant job losses, salary cuts, uncertainty about job prospects and tightening of credit standards, it could adversely affect demand for property. So, you should only think of investing in a property if you are sure about your cash flow in the near to mid-term future.
Why is it a buyer’s market
- Low mortgage interest rates
- Higher loan to value ratio available
- Affordable property sales prices
- Reduced service charges
- Attractive price valuations
- Developer incentives such as service fee waivers, free gadgets, kitchen appliances, etc.
Sales market performance
Both the rental and sales market in Dubai are expected to remain under downward pressure due to the market uncertainty. A potential contraction in income levels will make some buyers delay their decision making. Besides a drastic drop in demand, the limitations to physically view properties and conduct business are also leading to extended transaction timelines.
However, lower entry price points, attractive interest rates and the favourable loan-to-value ratio due to the increase of five percentage points for first-time buyers have improved affordability in the secondary sales mortgage market. Moreover, several developers are also offering service charge waivers for up to two years after handover, free kitchen appliances and gadgets as incentives to attract buyers in a down market. This presents an opportunity for cash-rich purchasers to take advantage of the current subdued market conditions.
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Published: June 25, 2020 12:00