Wealthy investors are buying Dubai homes with cash as interest rates rise

Wealthy investors are buying Dubai homes with cash as interest rates rise

A growing number of wealthy buyers are entering the Dubai property market with cash purchases as financing is getting more expensive due to rising interest rates.

About 81% of villas and apartments that were sold in the third quarter of the year were paid for with cash, up from 70% in the same period last year, according to real estate consultancy firm ValuStrat.

The value of cash transactions also nearly doubled to AED62 billion ($16.9 billion) from AED35 billion over the same period.

Mortgage registrations, however, have declined 6.9% quarterly and 10.4% annually, representing only 19% of overall ready-property sales in the third quarter of the year, according to Haider Tuaima, Director and Head of Real Estate Research at ValuStrat.

Interest rate hike

Cash deals are common in Dubai’s property market, but rising interest rates may have contributed to the trend. The US Federal Reserve has recently delivered the fourth consecutive interest rate hike of 75 basis points in a bid to stem inflation. This has led to higher borrowing costs for homebuyers.

“Increasing interest rates are expected to shrink the overall market catchment as EMIs (equated monthly instalment) become unaffordable to many potential buyers,” Tuaima told Zawya.

Improved market sentiment, coupled with investor-friendly reforms, may have