Dubai property turns corner: Mortgages overtake cash deals

Amount of real estate transactions up 15% at Dh129bn in H1 2015

Dubai Land Department (DLD) has announced that the total amount of real estate transactions recorded for Dubai Property in the emirate in the first six months of 2015 reached Dh129 billion ($35 billion).
This is over 15 per cent more than the Dh113bn in transactions recorded in the same half of last year.
A financial report issued by the Real Estate Research and Studies Department revealed that the number of transactions reached 23,000 during the first half of the year.
An interesting statistics that the report reveals is that mortgage transactions finally overtook cash transactions during the first half of the year.
While cash deals accounted for Dh53bn during H1 2015, mortgages accounted more than Dh65bn during the period, with Dh10bn accounted for by other operations.
This shows that mortgages accounted for more than 50 per cent of the total transactions amount while cash sales accounted for about 41 per cent.
Until last year, cash deals overshadowed mortgages, with cash transactions accounting for 54 per cent of total deals during H1 2014 while mortgages accounted for 42 per cent of DLD’s dealings over the same timeframe.
For the whole year 2014, statistics showed cash sales accounted for 51 per cent of the total transactions while mortgages accounted for 44 per cent.
This trend, which has been the sign of a young market, seems to have now turned for the better, as mortgages dominate the more established property markets across the world.
“The report confirms beyond any doubt that the real estate sector in Dubai is heading towards sustainable growth,” said Sultan Butti bin Mejren, Director General of Dubai Land Department.
“This can be ascertained from the continual increases from one quarter to the next, which have been a feature of the market over the last two years. In light of the report’s findings, investors and developers can have realistic expectations and can formulate effective strategies in the short and medium-term to meet the needs of the sector,” he said.
Mortgage borrowers are generally considered end-users and/or more long-term investors as opposed to cash buyers, who are considered to be in the market to make a quick return on their investments.
Long-term investors are imperative for any market to grow sustainably over a considerable period of time. With that in mind, the DLD took several steps including the doubling of the property registration fee to 4 per cent from 2 per cent in late 2013.
The strict measures undertaken by Dubai authorities also incuded increasing the down payment requirements, among others.
This led to a decline in speculative activity in Dubai’s property market, paving the way for sustainable growth and weeding out the speculators.
“The reliable data in the [DLD] report is far removed from fallacious information about the market that certain parties are trying to broadcast in order to achieve personal gain,” Bin Mejren added.
Transactions in detail
Looking at the transactions, sales and mortgages relating to land transactions recorded more than Dh106bn from the total real estate figure for H1 2015, with the total of 8,240 transactions.
The commercial lands (already built on) acquired the lion’s share in terms of value for the type of land with 47 per cent in total, noting that other lands include agricultural land devoted to the development of industrial projects, exhibitions, hotels and residences, and other uses.
Looking at the value of transactions by the kind of property, buildings and units transactions exceeded 15,355 transactions with a total value of Dh20bn during H1 of 2015.
In reference to areas, “Al Yafra 2” area of Dubai was revealed to be the most attractive for transactions, in terms of land value sales, with the value of its transactions reaching Dh2bn. For mortgages of lands, “Al Barsha South 1” came in first through 348 transaction worth of Dh360 million.
For unit sales, Business Bay area came in first with the value of its transactions reaching Dh2.5bn. As for mortgages of units, Dubai Marina came in first with transactions value reaching Dh1bn.
For buildings, “Al Thunaya 4” topped all areas in terms of building sales, with the value of its transactions reaching Dh377m through 158 sale transaction, as well as for mortgages of buildings with a total amount of Dh246m.