Rising interest rates have not yet become a common deterrent for mortgage clients in the UAE, although some brokers have noticed a rise in cash deals and a trend for buyers to move faster to secure minimum payments.
Realtors and mortgage brokers say most clients now want to fix their mortgage rates rather than continue to be affected by further interest rate hikes.
JPMorgan Real Estate said it sees about 50 percent of mortgage buyers using fixed-rate mortgage rates in 2021, compared with about 90 percent in 2022, as fixed-rate deals now average 4.49 percent.
Rates are as low as 2.39% in 2021, when clients are fixing rates for three years.
In the latest Dubai real estate market report, the proportion of cash transactions increased significantly as the year progressed.
In the second and third quarters of 2022, 8,629 and 8,469 cash transactions and 4,801 and 5,254 mortgage transactions were reported, respectively.
In the first quarter, these numbers were much closer, with 4,564 cash transactions and 4,461 mortgage transactions, according to the report.
For online mortgage broker Huspy, the number of people seeking mortgages has increased significantly as interest rates have risen, with recent applications up 25 percent per month.
Sawan Karia, head of Huspy's brokerage channel, said the growth may be partly due to its own market share increase, but also to higher interest rates.
Karia said the UAE central bank has asked UAE banks to revise their offers based on current rates, and more rate hikes are expected by the end of 2022.
On average, mortgage rates are at 4.5 percent, compared to 2.5 percent last year.
However, rates in the UAE remain competitive compared to some other global real estate markets.
Policymakers have played an active role in balancing the stability of the market with the growing demand for home ownership.
Kariya noted that compared to last year, customers taking out a fixed rate mortgage for a Dh2 million property now have a monthly mortgage payment of Dh2,000.
However, the 5-8 percent return on investment means that buying a home remains the preferred option for those looking for a stable asset in the face of financial uncertainty, he said.
Rosie Patterson, mortgage channel partner at Better Homes LLC, said mortgage applications are increasing monthly and annually, with an 80 percent and 33 percent increase in the third quarter of 2022 compared to the second quarter of 2021.
"We've had situations where banks have changed rates with less notice than before. However, this is a new normal for us and we keep our clients informed and get properties faster because we know rates may change," she said.
Patterson said there is less interest in remortgaging because of the cost effective impact of rising interest rates.
For Graham Brown, a mortgage adviser at MENA Mortgage Affairs, a division of Dubai-based broker haus & haus, the number of applications in the first and second quarters of 2022 was the same, with a 10 percent year-on-year increase in the second quarter and a 15 percent year-on-year decline in the third quarter.
Interestingly, interest rate hikes did start to deter some buyers from buying in February, but rising rents convinced others to buy, he said, adding that the exchange rate of the euro and pound against the dollar was also a consideration.
"The biggest hurdle is the amount of cash required," he said. "Of course, if you have funds in pounds or euros, then they will take a hit and that may mean clients can't buy at the required level.
"Some people just reduce their budgets accordingly, or wait until they get back to some sort of normalcy. Obviously, if your funds are held in dollars, there's no change."
