Off-plan property values fell for the majority of home loan borrowers in 2020, with 88 percent seeing valuations below the original purchase price.

The Mortgage Market Report 2020 by Mortgage Finder showed that values of completed properties held up better, with only 16 percent of borrowers reporting properties being valued below the property price.

The report also indicated a change in the UAE property market, often considered to be dominated by international investors, with 83 percent of home loan borrowers saying they planned to live in the properties they were purchasing themselves, and 97 percent being UAE residents.

In addition, 65 percent of mortgages were for completed properties rather than homes being sold off-plan.

Mortgage transactions increased by 40 percent from the first half to the second half of 2020, following the lifting of COVID-19 lockdown restrictions, Mortgage Finder said.  

Foreign buyers will be back

“We anticipate that as travel restrictions ease and COVID-19 vaccine programmes are rolled out globally, we will see non-resident borrowers re-enter the market in the final quarters of 2021,” said Brendan Kennelly, senior mortgage consultant, Mortgage Finder.

“Investors from the GCC and Europe, particularly the UK, are often keen to invest in the UAE.”

Kennelly said it was no surprise that off-plan properties fell further in valuations than completed properties.

“Buyers of off-plan property commit to the purchase usually around two years prior to the final handover date, when the property is completed,” he said.

“Overall property prices in the UAE have been on a downward trend in recent years so it makes sense that off-plan purchases would also take a hit.

He concluded: “However, with the downward trend levelling off towards the end of 2020, and prices even increasing in some well-established areas, we predict that the number of down-valuations recorded will decrease in 2021.”

Mortgage rates

While apartments had been the most popular choice among mortgage customers in the previous years, it was an even split in 2020, with 51 percent of borrowers purchasing villas or town houses versus 49 percent who opted apartments.

Mortgage borrowing rates also fell throughout 2020, with the Emirates Interbank Offered Rate (EIBOR) falling from just over two percent to under 0.5 percent from January to December, according to data from the Central Bank of the UAE.

Kennelly said as a result of this, variable mortgage rates may become more appealing to borrowers as they will be more competitive than fixed rate mortgages.

(Reporting by Imogen Lillywhite; editing by Seban Scaria)

(imogen.lillywhite@refinitiv.com)

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