Mortgage in-focus: The impact of U.S. Federal rate rises on Dubai household affordability.

Stuart Roe, Head of Mortgage Services at Allsopp & Allsopp, talks exclusively to CNN Arabia

This week, Stuart shares his expert insights on the impact of rising US interest rates on Dubai's real estate market in an exclusive interview with CNN Arabia.

Stuart notes, despite a rise in interest rates, buyer confidence over the past 12 months remained largely unwavering. "The primary impact rate rises had was 'affordability,' and the amount banks were willing to lend people against their earnings."

Using an example of a household earning AED50,000 in 2021, they would have been eligible for a mortgage of up to AED4.5 million. Fast forward to 2023, and that household would now see a 40% decrease in borrowing eligibility, down to AED3 million.

Despite this decrease in relative borrowing power, demand for mortgage products in Dubai reached a record high in 2022, showing confidence in the Dubai real estate market from residents and international investors alike.

"Although there are no signs that interest rates will start to decrease immediately, we are seeing the first signs of stabilisation, and a feeling that buyers can begin to plan for their future mortgage payments with a little more certainty, leading to increased market sentiment."

Stuart added, despite successive 0.25% increases in mortgage rates, the demand for home ownership in Dubai remains strong. The market continues to see an undersupply of readily available properties in key residential areas on the secondary market as annual population growth outstrips new properties coming onto the market. "There simply is not enough property in key locations to satisfy the current demand from the market, while at the very top of the market, we are seeing demand from HNWI's driving prices of ultra-premium properties in exclusive locations to never before seen highs."

When we factor in residential rental prices, also witnessing record increases across the city, the decision to own a home vs. paying a landlord is fast becoming an option many households take more seriously when considering planting longer-term roots in Dubai.

Talking to many prospective buyers, it has become clear that more are closely monitoring Dubai's real estate developments. As a result, I predict demand for housing will continue to drive prices up in Dubai by 10-15% in 2023.

If you are considering purchasing a property or would like to receive a free mortgage evaluation/advice, don't hesitate to get in touch with Stuart Roe on +971567587710