Allsopp & Allsopp Mortgage Services in Dubai have seen an increase in mortgage transactions by 57% in Q2 2020 compared to Q2 2019 and a rise in interest since lockdown was lifted.
Stuart Roe, Head of Mortgages explains the trends he has witnessed over the last three months and his predictions that sales transactions will remain high into the future.
Mortgage Transactions in Lockdown
Mortgage transactions were still happening during the lockdown, we were working remotely and in constant communications with banks to ensure mortgage pre-approvals were obtained but I must say that some of the mortgage transactions we completed in April were rollovers from March. March was a very busy month for us and lockdown had an impact on our momentum purely because viewings came to a halt and banks adopted and adapted to working from home regimes.
Loan to Value Initiative
The UAE government and Central Bank introduced new measures in April including the increase in loan to value (LTV) for first-time buyers in Dubai and reducing the interest rates. First-time buyers can now buy a property with an 85% mortgage for Emiratis and 80% for expats. So, instead of putting down a deposit and fees of 33% of the property value, you can put down 22%. This initiative really helps with people that were looking between the difference of affording a place to live and the home they truly desire. This higher loan to value along with the reduced longer fixed rates and lower fees to get into a mortgage is a great initiative in helping people get on the property ladder, and, in turn, moves the bottom of the market to enable existing owners to upsell and improve their current property to a larger plot or a different area.
Property prices are low and with the high LTV and low-interest rates, it has never been a better time to buy. Many people predicted a drop in pricing due to the pandemic, however, I personally don’t see much more decreases as we move forward. The Dubai property market, like other property markets around the world, is cyclical and in my 15 years experience in mortgages in the emirate, the prices always bounce back.
There have been some clients who are holding back on a purchase as they believe prices will fall further as the economic climate changes. However, along with these economic changes, banks may reduce the LTV again. I would suggest taking advantage of these government initiatives whilst they are still available.
The property market moved fast post-lockdown
We had a number of clients in May, after lockdown lifted, who decided to wait and see what happened in the market before proceeding with their property purchase but, the market moved fast and this took them by surprise. Properties that were upgraded and well presented were snapped up quickly and these buyers were left behind. However, this led to a very lucrative June as buyers were given the push they needed to continue with their purchase after already missing out.
Many first-time buyers who were looking to rent have reached out to us to enquire about a mortgage. The pandemic has made people think about their future and has inclined them to look into their options and ask questions which are leading to buyer education and more property sales. One client, in particular, was looking to rent a 1 bedroom apartment in Dubai Hills for AED 65,000 and decided to buy a 2 bedroom apartment for AED 1 Million and pay AED 4,026 in monthly mortgage instalments instead and start paying into his future rather than pay someone else's mortgage. If you see yourself in Dubai for the foreseeable future, it may be time to look into buying a property now.
Experiencing delays in the Mortgage pre-approval processes
The mortgage pre-approval process is still not back to where it was before lockdown and we are still experiencing some delays due to banks reducing their workforce and having a backlog of mortgage pre-approvals to process. We were getting pre-approvals back within 3 days pre-lockdown but can now wait up to 2 weeks in some cases which is frustrating for buyers who have found the property they would like to buy. I would advise clients to start the process as soon as possible so as not to lose out as properties are moving off the market fast.
Predictions for the future
I predict that the market will continue to move fast as long as properties which are coming to the market are well presented and at the right price. These are the properties that are the most desirable. Lockdown has made it apparent to many that the property in which they currently reside doesn’t work for them for one reason or another. However, I predict that those who are upgrading their properties at the moment may still decide to sell further down the line as the size of the property may have been the initial problem.
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