More than 8 in 10 of mortgage borrowers in the UAE are first-time buyers

In 2021, more than 8 in 10 of mortgage borrowers in the UAE were first-time buyers, according to Mortgage Finders’ second mortgage market report detailing its own transaction data for 2021.

The report has attributed the positive impact on the home loans market to the UAE Central Bank initiative in March 2020, which reduced down payment requirements for first-time buyers to 20 percent for resident expats, and 15 percent for UAE nationals.

Mortgage Finder is a tech-enabled advisory service powered by Property Finder. Its recent report covers data on property prices and final valuations, borrower demographics, and interest rate trends.

Compiled based on mortgage transactions overseen by the company throughout 2021, the report aims to empower borrowers and real estate professionals by providing insights about the UAE home loans market.

According to the report, UAE residents accounted for 94 percent of borrowers, whilst non-residents were only 6 percent.

The company processed home loans for buyers from more than 60 different countries, with nationals from Australia, France, India, South Africa, and the UK being in the majority.

Managing director, Mohamad Kaswani (below), said: “The mortgage industry experienced a record-breaking year in 2021, with transaction values exceeding previous highs recorded back in 2017 by 26 percent, according to data from the Dubai Land Department (DLD).

“Mortgage Finder also experienced unprecedented growth with 2021 transactions exceeding the previous two years combined.”

Most importantly, more than nine in 10 of the Mortgage Finder borrowers stated their purpose of purchase was to reside within the property.

Kaswani said: “We are energised by the trend in UAE residents choosing to put down firm roots by purchasing their own homes here. This is a trend we noticed following the lifting of Covid-19 lockdown restrictions back in mid-2020 and it has not slowed down.”

Key findings of the mortgage report

Borrowers in the home loans company with lower incomes increased by 44 percent, more specifically those earning below AED 20,000 per month. In 2020, those earning below AED 20,000 accounted for just 9 percent of borrowers, rising to 13 percent in 2021.

The majority of borrowers (37 percent) in 2021 earned between AED 41,000 – 60,000 per month.

The increase in borrowers earning below AED 20,000 can be attributed to two factors which have made home buying more accessible.

The first, is the 5 percent increase in loan-to-value ratios introduced by the UAE Central Bank.

The second, is the general low-interest rate witnessed in recent years, which in some cases made mortgage payments lower or equal to rental costs, according to the report.

Kaswani added: “This is a trend we are excited by, and one that we really hope will continue as the property market, and mortgages in particular, become more accessible. The reduction in down payment requirements by the UAE Central Bank was a great initiative in aiding this and allowing more people to get onto the housing ladder.

“The historically low interest environment, of course, has also positively impacted this, as mortgage payments edge closer to what borrowers pay in rent.”

Villa and townhouse properties proved more popular than apartments for borrowers – a trend which was widely reported across the market throughout the year. Approximately 64 percent of borrowers purchased villa or townhouses, whilst 36 percent opted for apartments.

Alignment between property valuations and purchase prices for Mortgage Finder transactions further improved, particularly for primary property transactions.

Approximately 61 percent of villa and townhouse valuations were above or in-line with purchase prices in 2021, versus 15 percent in the previous year.

Additionally, 35 percent of primary apartment purchase prices were above or in-line with valuation, versus 18 percent in the previous year.

“The improved alignment between valuations and purchase prices makes the mortgage process far easier for buyers. Furthermore, it is also a sign of maturing market behaviour as valuations moved in line with market changes,” Kaswani explains.

Mortgage interest rates remained relatively consistent throughout 2021, but still at historic lows, with banks offering competitive rates and products.

The trend in three-month Emirates Interbank Offered Rate (EIBOR) remained stable throughout the year, following the almost 80 percent drop from the beginning of 2020.

One-year and three-year fixed rate mortgage products were the most popular with borrowers.

Kaswani advised: “2021 was the first time that we have seen an almost flat-line in the 3-month EIBOR since the downward trajectory began in 2019, maintaining sub 0.5 percent throughout the year.

“We have seen interest rates rise already this year and anticipate further increases to come. Our advice to potential borrowers now is to investigate their options sooner rather than later, and take advantage of current rates.”