Allsopp & Allsopp mortgage transactions up 38% in 2020 despite city-wide lockdown - here’s why

As we entered 2020, we came in with lots of pipeline and many clients to speak to after having a lot of enquiries towards the end of 2019. For the first quarter of the year we were already seeing increased activity in the market and then Covid-19 hit. We didn’t do any less business as a result of the pandemic to begin with, in fact, in March 2020, I had my record month since being in the mortgage industry in Dubai for the past fifteen years. However, as lockdown hit, things got difficult. During lockdown, people still wanted to buy properties but transactions were being held up as banks adapted to their new work from home regimes. This had a knock on effect on property deals as a whole and not only on mortgages. With pre-approvals being held up, contracts were expiring and putting both buyer and seller back to square one. We were still keeping busy because of the number of enquiries that were coming through from buyers so, fortunately, the team didn’t stop - processes were certainly slower than before but we still had the ability to reach out to our clients and have initial conversations. 

As Dubai slowly moved out of lockdown, no one was to know what was going to happen with the property market - we were headed into the great unknown but the government was quick to add stimulus by introducing lower interest rates and increasing the loan to value (LTV). I believe these were a staple in the success of the property market and we were soon to see prices rising in certain communities across Dubai. However, we saw certain industries struggle; aviation, events, hospitality and even banks were letting people go and most industries were issuing reductions in salary - all of the above having a huge impact on the ability to get a mortgage for many potential buyers. Allsopp & Allsopp were receiving mortgage enquiries from buyers but it boiled down to whether or not they would be eligible for a pre-approval as banks were emerging from lockdown very cautiously. Many banks tightened their credit checks for mortgage pre-approval and then went back to buyers' employers before issuing final approval to check if there had been any changes in salary, which, in some cases, there was which led to deals falling apart. It was very difficult to try and hold deals together when we also had to work on our pipeline and contact the influx of enquiries we were getting - a challenging time for mortgage consultants. 

Allsopp & Allsopp mortgage transactions were up 38% in 2020 compared to 2019 and had a 16% increase in first-time buyers from Q1 of 2020 compared to the rest of the year despite the pandemic and the lockdown and I believe this is down to the lower interest rates and higher LTV introduced by the government. People who had no problems with salary were finding themselves in a position to buy and with property prices being as low as they were in 2008, they were making the first step onto the property ladder. For example, in 2019 a property could be worth AED 2.5 Million with a down payment of 33% at AED 800,000, but in 2020 the same property could be purchased for AED 1.9 Million with a down payment of 22% at AED 400,000. Not only was it a lot cheaper, but clients were also paying less in upfront costs. This has led to a sudden influx of buyers in certain areas across the city and could be a factor in the increasing property prices. Allsopp & Allsopp reported an 8% increase in property prices across Dubai. 

In my fifteen years in the mortgage industry in Dubai, I have found that the real estate market follows a herd mentality. Once one person buys and talks about it, they get other people thinking the same and leading to them buying a property themselves, and so on. When it comes to investing money, with the pandemic still very much around, people feel safer putting their money into bricks and mortar - something they can benefit from by living in or renting out but ultimately, something they can physically see and touch. There are a lot of people still waiting to buy when the market price reaches the bottom - I always tell my client not to wait, but instead, to buy when the market is on the way down. If they wait, they’ll miss the bottom and before they know it, the prices are heading back up. We have seen this in certain communities in Dubai towards the end of the year! 

During the latter quarters of 2020, we did notice a lot more investors - Chinese investors in particular, enquiring about purchasing property in Dubai and looking into their finance options. In my opinion, as we move into 2021 and beyond, I think that more finance packages need to become available for overseas investors. The end-user market has benefited hugely from the stimulus package introduced by the government last year, I think it is now time to look into encouraging investors further and an attractive finance option to buy a home in Dubai would have an extensive effect on the property market and the city's economy.