There have been a bearish market sentiment lately as it relates to the stock market decline and increased interest rates. Both of these are bad news for Investors. The stock market have been on a downward trend which does not forecast a recovery in the near term and the increased interest rates has increased the cost of borrowing for securing real estate investments. Also, inflation is all time high which means holding cash is not an option either.
Earlier this year, the Central Bank of the United Arab Emirates followed suit with the United States federal funds and increased its interest rates by 25 base points. However, the great news is, even with increased interest rates, the cost of borrowing in the UAE is still historically low and investors are still able to secure a fixed rate mortgages before further hikes occur later in the year. The cost of borrowing may continue to rise as the Feds continue to tackle inflation. At the time of this article, the best three-year fixed rates are currently between 2.75 per cent and 2.99 per cent while variable rates are still as low as 1.85 per cent.
The stock market provides an overall positive impact to the real estate sector. As stocks continue to plunge in the near time, investors are turning to the real estate sector for a more secure form of investment and portfolio diversification. Even though interest rates have increased, employments rates have remained steady and people are more driven to their mortgage commitments based on job security. However, if interest rates continues to increase, investors may want to hold on to cash, but again cash is trash given inflation is at all time high.
Unlike other part of the world, the UAE real estate still remains a buyers market and the barrier to entry is low, the prices are dictated by the demands of investors and the interest rates still remain highly competitive compared to other regions. We had seen an influx of investors in real estate sector based on the gains that were realised in the stock market in the past year. The only negative impact the stock market could have is the ability of buyers to have enough down payment to secure their property of choice in the secondary market given the current volatility that does not provide an opportunity to sell without realising the losses.
Buyers investing in off plan properties still have the opportunity of securing their dream assets with flexible payment plan that nullifies the current market conditions.
Working with a professional real estate advisory firm is sacrosanct in making informed investment decisions, while we are not financial advisors, we will ensure we provide you with the right tools to ensure you are able to make an informed decision.
Reach out to us at info@blytheandcompany.com or +971 526 454 720.
