Dubai property buyers are exploring alternatives to mortgages

With a number of alternatives becoming increasingly viable, home buyers in the Dubai real estate market are actively considering alternatives to bank loans. The trend of considering alternative finance arrangements, that forgo traditional mortgages, is already assuming reasonably large proportions. While post-handover payment plans have drawn a section of the market for some years already, these and other alternatives are finding an increasing amount of takers. Data released by the Dubai Land Department (DLD), for the first six months of 2019, pegged property purchases that included a mortgage at 62% – a significant drop from the 81% recorded for H1 of 2018(1).

With mortgage rates having risen significantly in the previous 12 months, many in the Dubai developer community opted to ease the purchasing process proactively through the means of innovative payment plans. Although marginal dips, in concert with the base rate cuts announced by the US Federal Reserve have eased mortgage rates in Dubai, post-handover finance has proved popular among buyers. The number of Dubai mortgages signed off on, for the first half of 2019, was 4073. This is a fall of 26.5% compared to the 5539 units recorded in 2019, for the same period(2).

Ease of access and affordability are enticing customers

It’s important to note that the drop in mortgages, from 81 to 62 percent, only measures the trend as it is reflected in completed properties. Lucrative post-handover payment structures are also part of the off-plan market, which has been a vigorous part of the Dubai real estate market in recent years. The cumulative figures, that represent buyers preferring to enter into agreements with developers rather than banks, would be even higher than those reported by the DLD.

According to Prabhakar Rao, Managing Director of Gemini Property Developers, the proactive payment-schemes offered by the developer community have altered the market for the foreseeable future. “The temporary lull that set in post 2014, in the Dubai real estate market, prompted all stakeholders to take stock and reconsider their strategies”, says Prabhakar Rao. “The developer community has been quick to seize the moment as soon as the combination of legislative changes, visa laws, buyer profiles and lending rates created demand as well as the room for innovative offers. By giving options that bypass bank approval and offer rebates on registration fees and ancillary charges, the options available to prospective buyers have multiplied. This is basically why the market has responded so enthusiastically”, Prabhakar Rao adds.

A market full of bargains

According to figures being reported on Property Monitor, Cavendish Maxwell’s market tracker, buyers interested in ready properties have it measurably better this year, than they did a mere 12 months ago. Housing prices in several segments of the Dubai market continue going lower and locations such as Arabian Ranches, Emirates Living, Discovery Gardens and Dubai Silicon Oasis have registered an average decline of more than 16%. This lowering of prices is creating a significant rise in interest, especially in the mid-market segment, and non-mortgage arrangements become particularly attractive in such a scenario.

Prabhakar Rao is of the opinion that market conditions are driving interest among a wider cross-section of buyers and developers are in a position to leverage these trends. “If you look at the market segments in some detail, both investor and owner-buyers make up the prospective customers. Despite the fact that the market has inventory ready to go, demand is not particularly slack”, Prabhakar Rao explains. “The fact that the rental market is not suffering a glut of vacant properties suggests that demand is not slacking. The increased number of purchases also supports the conclusion that buyers are actively entering the market too. So while prices are falling, there seems to be no dearth of interested parties snapping up the bargains”, Prabhakar Rao adds. 

A customer driven market, is a competitive market

If one were to be succinct about the overarching trends across the Dubai real estate market, in its current state, the simple assessment would be that customers have it good. Legacy models don’t adequately fit the picture that is emerging. While both rentals and property prices are lower, the room that is creating is drawing a healthy amount of takers. This is not a market running from pillar to post trying to entice buyers. On the other hand, lower prices are resulting in a healthy spike in transactions. What a market should worry about is when there are no takers, even when a product has dropped in price.   

Prabhakar Rao believes that the response that the customer friendly pricing is receiving is reflective of the fundamental strengths of the Dubai real estate market. “Everything is lining up for the customer at the moment. The market is sensing a revival and there is an underlying confidence in the fundamentals. The rise in the number of buyers saying yes to non-mortgage payment options is a result of developers realizing that demand is ready to respond as long as it is enticed. I anticipate banks adding to positives for buyers, with the introduction of their own customer friendly initiatives as well”, Prabhakar Rao concludes.


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