Dubai’s real estate market may experience a slowdown
Dubai’s real estate market may experience a slowdown in growth following the 2022 record-breaking year, as a result of the rising interest rates. The Central Bank of the UAE elevated its base rate for the Overnight Deposit Facility by 0.25% to 4.65% from 4.4% on February 2, 2023, following the US Federal Reserve’s eighth increase in the policy rate to control inflation.
According to Zoom Property Insights, this rise in interest rates has diminished consumers’ purchasing power and could lead to a decline in demand, which may affect property prices. However, since the majority of real estate transactions in the UAE are conducted in cash, the impact of the interest rate increase is expected to be minimal.
Ata Shobeiry, CEO of Zoom Property, believes that the impact will be limited and that the market will continue to grow, albeit at a slower pace compared to the previous year. 2022 saw a price growth of over 11%, which was a decrease from 16% in 2021, largely due to the Covid-19 pandemic.
Zoom Property Insights predicts that prices will rise by 5% this year, driven by strong demand from high-net-worth individuals and foreign investors. Shobeiry concluded that although the interest rate may reach 4.90% by the end of the year, Dubai’s attractive offerings to entrepreneurs, investors, and end-users will continue to attract potential buyers and drive market growth.