Mortgage size in UAE drops as owning a house becomes more affordable


Image used for illustrative purpose. Dubai Marina skyline.

The reduction in UAE property prices over the past few years has made home ownership more affordable, a fact also borne out by reductions in the average size of home loans.

According to mortgage consultancy firm Mortgage Finder, the average size of a home loan in the UAE in May 2019 was $356,700 (1.31 million dirhams) compared to an average loan size of $454,731 (1.67 million dirhams) in May 2018.

This is in line with the current market trend, which has shown a downward shift in property prices over the past few years in the UAE.

“We have seen a shift from an investor-led market to an owner-occupied market, with more end-users buying to live in the property. This is likely due to the downward shift in prices, which has made home ownership more affordable and achievable,” said Chris Schutrups, Managing Director, Mortgage Finder.

According to Mortgage Finder, there are many trends in the market encouraging more property purchases.

“Property prices could go down further as we are seeing more supply coming to the market. Moreover,  banks are now allowing to add some of the transactional fees on to the loan making it more easy and affordable for buyers, who now have to put forth less cash to buy the property,” Chris told Zawya.

The average annual house price in the Dubai, which is considered the hub of real estate and property transaction in the UAE, decreased by 13.2 percent, with some with some communities registering even higher price declines, according to Property Monitor’s Dubai House Price Index for April 2019.

Prices also retreated 1.5 per cent month-month and were down 4.9 per cent during the first three months of the year compared with the previous quarter.

Mortgage Finder has seen enquiries go up by 59 percent between April 2018 and April 2019, and submissions to banks for mortgage approvals by 78 percent.

With reference to interest rates, Mortgage Finder estimates that buyers prefer opting for a fixed rate in over 80 percent of enquiries. A fixed interest rate is an unchanging rate charged on a mortgage. It might apply during the entire term of the loan or for just part of the term.

“However, with recent predictions from the US Federal Reserve about rate reductions this year, we are seeing a few, more sophisticated buyers opt for lower margin variable rates,” adds Schutrups.

The U.S. Federal Reserve on June 19 held rates steady but raised the prospect for two potential rates cuts this year.


Written by Loknath Das