Increased interest rates are unlikely to affect Dubai’s real estate market.
According to analysts, executives, and industry players, the bulk of real estate transactions in the UAE are conducted in cash and will not be harmed by the regular increase in interest rates. According to them, the market would increase at a constant rate of up to 5% this year, rising to 11% in 2022.
“The year 2022 ended on a memorable one for the Dubai property market, as it surpassed multiple records. However, the real estate sector may take a different path in 2023, owing in part to rising interest rates and their influence on consumers’ purchasing power. Of sure, there will be growth, but not at the same rate as last year,” says Zoom property CEO Ata Shobeiry.
With consequences from February 2, 2023, the Central Bank of the UAE increased its base rate for the Overnight Deposit Facility (ODF) by a quarter percentage point to 4.65 percent from 4.4 percent following the US Federal Reserve’s eighth policy rate increase to bring inflation down to its target range of 2%.
“As the ODF was raised to 4.65% from 1.55% in 2022, consumer buying power was weakened. This may result in diminished demand, which, eventually, can effect property prices,” according to the Zoom Property Insights.
Shobeiry believes that the influence of the interest rate rise would be minimal, and that the real estate market will continue to develop, although at a slower pace.
Approximately 70% of real estate transactions in the UAE are conducted in cash. As a result, higher interest rates will have a minor influence on the market, according to Zoom Property Insights.
“The interest rate may reach 4.90 per cent by the end of the year. However, the benefits Dubai provides to businesses, investors, and end-users will continue to attract prospective customers, driving the market’s growth in the future years,” Shobeiry added.
Interest rates are not the main factor
According to Atik Munshi, managing partner at FinExpertiza UAE, interest rate increases and decreases are one of the elements that affect real estate values, but there are many other more significant aspects that give the industry pace.
In terms of investor attitude, optimism in future outcomes, projected returns, and resale value expectations, he stated that the UAE and Dubai real estate markets are still performing well, notably in the luxury class, where interest rates are low.
“For individual private investors the hike in interest rate may have some influence albeit one also wants to rethink the impact of these changes. Overall, the market appears to be gaining traction,” Munshi told Khaleej Times on Sunday.
Property development will continue.
The year 2022 had a price increase of little more than 11%. It was down from over 16% in 2021, although this was primarily due to lower pricing caused by the Covid-19 epidemic.
According to a preliminary estimate by Zoom Property Analytics, prices will rise by 5% this year due to robust market demand as high-net-worth individuals (HNWIs) and overseas investors continue to stream in and invest in the industry.
Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. PropertyPistol does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.
