Low mortgage rates lift home sales in Dubai property market

The Lakes, The Meadows and The Springs are among the best-performing villa developments. Above, a sold villa in The Springs. Jeff Topping / The National

Better deals on mortgages are helping to boost home sales in Dubai, according to the property consultancy Cluttons.

Banks are offering mortgage rates as low as 3.5 per cent, slashing arrangement fees and speeding up the processing of applications, the company said in a first-quarter report on the Dubai residential market.

"Residential sale transactions saw a natural increase in January and February, particularly in the villa market, aided by the confidence given by the resurfacing of the local mortgage market," Cluttons said. "Mortgage lenders, who continue to fight for market share, offering more attractive rates to credit-worthy clients purchasing particular stock, have aided recent activity."

Property prices in Dubai have fallen by as much as 60 per cent. High mortgage rates have often been cited by developers as a hindrance to getting buyers back into the market. But there seem to be signs of a shift, according to Cluttons.

"The overall trend in the marketplace is positive, with stability and even growth seen in certain locations over the past six months."

Prices for high-end villas in Dubai increased to an average of Dh1,150 (US$313.07) per square foot last month compared with Dh1,080 in October, figures from Cluttons show. The Lakes, The Meadows and The Springs are among the best-performing villa developments. Meanwhile, villa prices in Jumeirah Village and Green Community have declined, the report says.

A further sign of optimism came as Al Mazaya, a property developer listed in Kuwait and Dubai, yesterday said it had signed construction contracts to restart some of its suspended projects in Dubai because there were "some signs of demand on real estate units in Dubai by international companies". Al Mazaya reported a net loss of $57.2 million for last year.

The Dubai property developer Nakheel last week said that it was seeing signs of improvement.

It is launching sales tomorrow for a new townhouse development planned for the Palm Jumeirah, with prices ranging between Dh6m and Dh8m.

In some areas, property values have continued to decline, however.

"Values of apartments in less desirable locations have continued to be eroded by oversupply and poor property management," Cluttons said. "Areas such as Discovery Gardens and International City have fallen by 7.8 per cent and 5.6 per cent, respectively, from the third quarter 2011."

But apartments in the Burj in Downtown Dubai and The Greens have increased in value over the past six months, the report shows.

Cluttons added that the "resonance of the Arab Spring continues to help the Emirates".