Youssef Al Arabi (Dubai)
The decline in interest rates in the Emirates contributes to increasing the attractiveness of the real estate sector in the Emirates for local and foreign investments, according to real estate experts and officials.
They told Al-Ittihad: Low interest rates have a generally positive impact on the real estate market. By reducing the cost of borrowing, the possibility of purchasing a home or real estate financing becomes easier, and thus, demand increases and real estate sales rise, as individuals and investors seek to take advantage of lower financing costs. .
They explained that low interest rates increase the attractiveness of real estate as an investment option, especially for investment institutions and foreign investors, which is especially true for the UAE, given the favorable tax policies and welcoming environment for expatriates.
On September 18, the Central Bank of the Emirates decided to reduce the “base rate” on overnight deposit facilities by 50 basis points, from 5.40% to 4.90%. This decision came after the Federal Reserve announced a reduction in the interest rate on reserve balances by 50 basis points.
Experts stated that the most prominent repercussions of the lower interest rate are increased borrowing capacity, increased real estate sales, raised market sentiment, and enhanced purchasing power.
They emphasized that although the full effects of these interest rate cuts will take some time to materialize, there are several factors that continue to attract investors to the UAE real estate market, including business-friendly government policies, infrastructure development initiatives, and the economy. Its strong investment potential, tax advantages, distinctive lifestyle, safety and security contribute to its attractiveness as a place to live and invest.
Ability to borrow
For his part, Arash Jalil, CEO of Unique Real Estate, said: The decline in interest rates significantly affects the real estate market in the UAE in multiple ways, especially due to the UAE’s currency being linked to the US dollar.
He noted that lower interest rates lead to increased borrowing capacity, as lower interest rates reduce mortgage costs, which makes it easier for buyers to obtain financing to purchase real estate. Therefore, this can contribute to increasing demand for housing due to higher rental prices.
He pointed out that the second effect is an increase in real estate sales. When financing becomes less expensive, a larger number of buyers enter the market, which may lead to an increase in real estate sales and an increase in their prices.
He added that lower interest rates also lead to increased investment, as low interest rates encourage both local and foreign investors to invest and enter the real estate market, which enhances demand and leads to higher prices and rental returns.
This step opens up refinancing opportunities, as homeowners are more likely to refinance existing loans to take advantage of lower interest rates, which increases the income available for spending or investing.
He pointed out that lower interest rates also lead to development activity, as developers find that financing new projects has become more attractive, which leads to increased construction and development activity in the market.
He said: It contributes to raising market sentiment, as low interest rates usually indicate a positive economic environment, which enhances consumer confidence and encourages investment in real estate. In general, lower interest rates could contribute to creating a more vibrant and active real estate market in the UAE, as these financial changes enhance the purchasing power of buyers, leading to increased demand for real estate.
He concluded: In addition, facilitating financing conditions attracts more investors, whether local or foreign, which leads to increased activity in the market. This is also reflected in real estate prices, which may witness a noticeable increase, in addition to increasing sales. All of these factors contribute to enhancing Investor and consumer confidence in the market, which creates a favorable investment environment that contributes to the sustainable growth of the real estate sector in the country.
Positive effect
Ravi Menon, Co-Chairman of Sobha Group, confirmed that lower interest rates will have a generally positive impact on the real estate market.
He explained that by reducing the cost of borrowing, the possibility of purchasing a home or financing real estate becomes easier, thus increasing demand and increasing real estate sales, as individuals and investors seek to take advantage of lower financing costs.
He stated that in addition, low interest rates increase the attractiveness of real estate as an investment option, especially for institutional investors and foreign investors, which is especially true for the UAE, given the favorable tax policies and welcoming environment for expatriates.
He continued: It is important at the same time to take the broader economic context into account. While low interest rates can stimulate the market in the short term, the continuity of market growth in the long term is governed by other factors, such as global economic trends, and it is therefore necessary to follow a balanced approach that takes into account Immediate and long-term impacts in order to ensure sustainable growth.
Mortgage
Yevgeny Ratskevich, CEO of Metropolitan Capital Real Estate, said: The UAE Central Bank’s recent historic 50 basis point cuts to the base interest rate will have a positive impact, driving down mortgage rates, making homeownership an affordable move for many people.
He added: Although the full effects of these interest rate cuts will take some time to materialize, there are several factors that continue to attract investors to the UAE real estate market, including business-friendly government policies, infrastructure development initiatives, and the economy. Its strong, tax advantages, distinctive lifestyle, safety and security contribute to its attractiveness as a place to live and invest.
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