The way in which we buy homes in 2020 has had to change and it has had to do so very quickly.
With lockdown shutting down the real estate market in Dubai and other cities globally, a lot of new ways of buying a home came into play. Viewings were a complete no-go area and luckily with the advances of technology within the industry, a new way to view was introduced.
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Virtual viewings have become the norm and buyers are expecting to see a property virtually before viewing physically and in some cases, are buying homes off the back of a virtual viewing only and signing contracts online if they are overseas.
As well as viewings becoming easier, as did the financial aspect of buying a home. The UAE government and the Central Bank of the UAE were quick to initiate a stimulus to the market in the early news of Covid-19 with the increase in the Loan-To-Value (LTV).
This stimulus was put in place to alleviate the strain on industry finances in the light of Covid-19 as levels of uncertainty were entering the markets worldwide. This government stimulus helped and continues to help ensure the property market stays buoyant and this kind of proactive, speedy leadership is hugely reassuring.
The LTV increase of 5 percent for first-time buyers had an impact on the number of client registrations. In Q2 2020, Allsopp & Allsopp reported an increase in buyer registration of 28 percent on Q2 2019 with registrations in August 2020 105 percent up on registrations in Aug 2019. The increase in LTV is something that has been long-mooted, even before the Covid-19 outbreak, and it now gives buyers who are saving for a deposit a helping hand to make their first UAE property purchase.
This is coupled with interest rates being at their lowest levels for a long time and property prices being at an attractive and affordable level. Something that may be missed by many is the Central Bank’s instruction to be considerate to those with a current mortgage and offer assistance where necessary. This adds a level of comfort and confidence in making an investment in Dubai.
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The increase in LTV teamed with low-interest rates means that first-time buyers can now buy a property with an 85 percent mortgage for Emiratis and 80 percent mortgage for expats. So, instead of putting down a deposit and fees of 33 percent of the property value, first-time buyers can put down 22 percent. This initiative really helps with people that were looking between the difference of affording a place to live and the home they truly desire. This higher loan to value along with the reduced longer fixed rates and lower fees to get into a mortgage is a great initiative in helping people get on the property ladder, and, in turn, moves the bottom of the market to enable existing owners to upsell and improve their current property to a larger plot or a different area.
Many first-time buyers who had been looking to rent have reached out to brokers to enquire about a mortgage. The pandemic has made people think about their future and has inclined them to look into their options and ask questions which are leading to buyer education and more property sales.
One client, for example, reached out to Allsopp & Allsopp when they were looking to rent a 1 bedroom apartment in Dubai Hills for AED65,000 and decided to buy a 2 bedroom apartment for AED1 million and pay AED4,026 in monthly mortgage instalments instead and start paying into his future rather than pay someone else’s mortgage. If expats see themselves in Dubai for the foreseeable future, it may be time to look into buying a property now.
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A lot of people have been waiting for the right time to buy. Dubai is now in a situation where prices have declined for 6 years, the economy is coming through something the world has never experienced before, the upfront money needed to enter the market has dropped to the lowest level needed for 6 years and mortgage and interest rates are as low as they have ever been. Clients have come round to the thinking that if now isn’t the right time to buy when will be?
In some cases, buyers have been holding back on purchasing a property as they believe prices will fall further as the economic climate changes. However, in the last couple of months, Allsopp & Allsopp have seen a huge demand for properties that are in great condition and at an attractive and competitive price but these properties are becoming few and far between and some buyers are now willing to pay a little extra to get the property they desire. This has led to an undersupply in a number of communities across the city – a true indication of the health of the Dubai property market.