Off-plan property costs decrease for the majority of home loan borrowers in 2020, with 88 percent witnessing costs lower the original purchase cost.
The Mortgage Market Report 2020 by Mortgage Finder provided that costs of finished properties held up better, with only 16 percent of borrowers reporting properties being valued below the property cost.
The report also showed a change in the UAE property market, often considered to be dominated by international investors, with 83 percent of home loan borrowers providing they planned to live in the properties they were buying themselves, and 97 percent being UAE residents.
Adding on, 65 percent of home loans were for finished properties rather than homes being sold off-plan.
Home loan deals raised by 40 percent from the first half to the second half of 2020, then comes the lifting of COVID-19 lockdown restrictions, Mortgage Finder provided.
Foreign buyers will be back
“We anticipate that as travel restrictions ease and COVID-19 vaccine programs are rolled out globally, we will see non-resident borrowers re-enter the market in the final quarter 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 nothing unexpected that off-plan properties fell further in valuations than finished 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 leveling 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 famous choice among home loan customers in the last years, it has an even split in 2020, with 51 percent of borrowers buying villas or townhouses versus 49 percent who choose for apartments.
Home loan borrowing rates also decrease throughout 2020, with the Emirates Interbank Offered Rate (EIBOR) decreasing from just over two percent to under 0.5 percent from January to December, as per the data from the Central Bank of the UAE.
Kennelly provided as an outcome of this, variable loan home rates may become more appealing to borrowers as they will be more competitive than fixed-rate mortgages.