Knight Frank reports AED 61.9 billion ($16.85 billion) in apartment and villa sales in Dubai so far in 2022.
The property consultant claimed worldwide inflation surges are unlikely to affect the UAE economy and Dubai’s residential market for now. This is because the government has a diverse import policy, has recently taken steps to improve food security, and the US dollar is strong.
By far the most successful policy is the government’s preemptive covert effort to freeze prices on 11,000 essential products, including milk, bread, meat, and chicken.
The rise in crude oil prices has made the policy stronger and will help the economy grow.
Mortgaged purchasers account for 18% of Dubai’s home market value, compared to 40% last year and 50% in 2007.
Ashley Bayliss, partner and head of mortgage and debt advice, said that while this looks to be a drop in residential mortgage lending, as of May there was approximately AED 38 billion of financing across all real estate asset classes.
He continued to say that extrapolating the number of sales so far this year, 2022 might see the second most mortgaged deals in the previous five years for the total real estate market. Banks must keep up with the market’s expansion.
The unrelenting inflow of ultra-high net worth individuals targeting Dubai’s most costly residences led to cash acquisitions, Knight Frank added.
Faisal Durrani, head of Middle East Research, expects 5-7 percent growth in Dubai’s general market and 12-15 percent in elite markets this year.
Durrani says that most high-end home purchases are made with cash because ultra-high net worth capital is used to buy Dubai’s most expensive homes. The unrelenting inflow of ultra-high net worth individuals targeting Dubai’s most costly residences led to cash acquisitions. He added that cash remains king, so the home market isn’t in danger, he added.
Durrani thinks that the average price of a house in Dubai will go up by 5% to 7% this year, while the price of a luxury home will go up by 12% to 15%. He noted that Dubai is a good inflation hedge.
Knight Frank used data from Oxford Economics to show that Abu Dhabi’s GDP is going up this year. It also referenced the UAE’s rising PMI.
The report said that global travel and Dubai’s popularity as a tourist spot are likely to keep the emirate’s GDP at about the same level as last year.
Bayliss said that the fiscal policy of the UAE is similar to that of the US. The has been a recent 50 basis point increase in interest rates to 2.25 percent. This means that mortgaged households will have to pay more in the future, but it is still similar to other international prime markets.
According to the statement, only 18% of Dubai’s home market is mortgaged. In 2007, almost 4% of deals were funded.
Based on the number of mortgage agreements so far this year, 2022 might see the second-highest level in the past five years, he noted.