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Because Mortgage Transactions Account For Only A Quarter Of All Home Sales. Rising Rates Will Not Have A Significant Impact On The Emirate’s Real Estate Market.
According to experts, the ongoing rise in interest rates will not have any impact on Dubai’s real estate market. Which will continue to rise at a steady rate due to rising demand. Rising interest rates will not have a significant impact on the real estate market. According to analysts, property developers, real estate executives, and industry insiders, as mortgage transactions make up only 25% of all home sales. The increase, they cautioned, could affect future demand as well as slow the market’s rate of expansion.
“There is no question that the real estate market is negatively impacted by higher borrowing costs. However, given that mortgage transactions account for only a quarter of all home sales in Dubai. This impact not anticipated to be particularly severe “According to Haider Tuima, director of ValuStrat’s realty research, Khaleej Times.
The Federal Reserve increased benchmark interest rates last week for the third time in a row. This time by three-quarters of a percentage point, and said it will continue to do so well above the existing level.
The goal of the US central bank is to reduce inflation. Which is currently close to its highest level since the early 1980s. The federal funds rate just raised to its highest level since early 2008, which is between 3 and 3.25 percent. The funds level will raise until 2023. When it will reach its “terminal rate,” or endpoint, of 4.6%, according to Fed officials. That suggests a rate increase of a quarter point but no decrease for the following year.
Impact Nominally On Monthly EMIs
The increase in interest rates, according to Ata Shobeiry, chief executive of Zoom Property, is consistent with the global market. Because central banks all over the world were forced to raise their policy rates in order to control inflation. The increasing interest rate will undoubtedly have an effect on the market. However, it is too soon to gauge the impact’s scope “Shabyery stated. Property industry will not be significantly affected by an increase in interest rates, according to head of real estate consultancy Core.
“Due to the fact that the increase in interest rates are coming from a very low base, the impact is still not felt all that strongly yet. In addition, are still quite low in comparison to historical values. In the case of a mortgage for a DH1 M property with a 25-year loan term, a 100 base point, or one %, increase in interest rates results in a Dh430 increase in monthly mortgage payments. A 100 basis point rise on DH5 M property results in a Dh2140 increase in the monthly mortgage “By Thomas.
In response to rising rents, he claimed that it might encourage people to buy rather than continue to pay high rental rates. “Many buyers will lock in fixed interest rates to avoid potential interest rate increases. Nevertheless, additional interest rate increases along with an increase in inflation are anticipated to have an effect on the disposable incomes and property investment prospects of middle-class end users “said he.
Purchases by Investors
The CEO of Fakhruddin Properties, Yousuf Fakhruddin, stated that the recent increase in interest rates might have an impact on investors’ purchasing patterns in the market. Although higher interest rates might have an impact on the market in aspects of demand and prices. He added, “It also gives us a chance to offer our customers more enticing payment plans.”
“We provide a post-handover purchase plan, for instance, with a “pay one percent interest” payment schedule. This gives our customers the chance to learn more about our strategy and profit from its beneficial features. Investors can experience greater peace of mind and avoid the hassle of fluctuating rates with this plan. Everything ultimately comes down to the buyer’s affordability and the state of the market. Despite these obstacles, we are confident that the UAE‘s real estate market will continue to expand.
Investors Are Ready
As evidenced by decade-high yields on US Treasury bonds, according to Srijan Katyal, global head of trading services at ADSS. Investors have been well prepared for the Fed’s third consecutive 75-basis point hike.
“Given their concerns that the Fed’s aggressive interest rate policy will go too far and push the economy into a recession. Investors will probably keep selling stocks as it works to combat the record levels of inflation. As Putin announced a partial military mobilization, the geopolitical situation will worsen, which will make this situation worse.
As pressure on the pound and other European currencies intensifies, he predicted that the dollar might strengthen further after reaching a 20-year high. “Markets anticipate a recession along with growing unease between the East and the West. So traders will need to keep an eye out for gold, according to Katyal.
