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| 08 March, 2018

UAE's realty sector is maturing

The sharp rise to 55% of buyers financing their home is a sign of maturity in the UAE real estate market

Buildings are pictured as a model of Reem Island is seen in Abu Dhabi February 16, 2014. REUTERS/Stringer

Buildings are pictured as a model of Reem Island is seen in Abu Dhabi February 16, 2014. REUTERS/Stringer

REUTERS/Stringer

UAE - The sharp rise to 55 per cent of buyers financing their home is a sign of maturity in the UAE real estate market, as more and more residents take advantage of low borrowing costs to buy a property.

Experts say that the pendulum officially swung from majority cash-buyers to most in the UAE buying property with a home loan at the end of 2016. According to REIDIN, in 2012, the percentage of those taking out a home loan was less than 20 per cent. The shift makes for a more stable market, but leaves individuals vulnerable to interest rate hikes.

However, there are a few things to keep in mind for home owners considering borrowing in 2018. Firstly, home ownership is set to become more expensive. UAE mortgage rates are tied to the Emirates Interbank Offer Rate (Eibor), which has been stable for years but is set for incremental increases as the United States Federal Reserve ups interest rates.

In addition, they need to see if they can lock in a fixed rate. Generally, fixed rates provide homeowners with the comfort of knowing what their payments will be during their fixed rate period, regardless of what happens to Eibor.

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Thirdly, experts say that off-plan isn't for everyone, but it has an upside; off-plan financing is restrictive, given the policy that a maximum of 50 per cent financing is available, which also depends on payment schemes and developments partnering with banks for payment plans. But where there are payment plans of 25 per cent payable under construction and 75 per cent at completion, buyers can make their final payment to the developer by way of a mortgage.

Also, Brendan Kennelly, senior mortgage consultant at Mortgagefinder, noted that the affordability of villas and the increase in property stock has made the dream of owning a property more of a reality. Lastly, even if borrowing gets more expensive, experts say it's still cheap, historically speaking. 

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