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DUBAI/GULF TIME
Mohamed Hareb Al Falahi, Founder and General Director of Royal Liwan Real Estate, expects interest rate cuts in 2025 to boost UAE real estate sector, with lower financing costs and increased mortgage transactions, along with demand for safe assets with fixed returns such as gold and real estate.
“When interest rates fall, the cost of borrowing declines, including for property purchases, while high interest rates have kept many buyers and sellers out of the housing market,” Al Falahi said.
He expected this category of customers in the UAE to be encouraged to borrow and carry out property purchase deals.
Al Falahi stated that the UAE real estate finance sector witnessed remarkable developments recently with the Central Bank cutting interest rates in September 2024 for the first time since 2020.
He added that the US Federal Reserve has cut interest rates three times during 2024, so that they currently range between 4.25 and 4.50%, and it is known that Gulf banks, including the UAE Central Bank, are following the US central bank’s plan due to the dirham being pegged to the dollar.
Al Falahi stated that prospects regarding interest rate cuts may reach 4 times in 2025, but this will determine the path of inflation and whether it will be affected by the policies of US President Donald Trump.
He stressed that during the interest rate cut cycle, make a chance for those ready to make the decision to buy a property. Since mortgage interest is heading towards a decline, on the one hand, estimates indicate that the boom in real estate prices in Dubai will continue and will not decrease in the near term, so making the decision to invest in light of the interest rate cut factors will reduce the cost and increase the chances of expected gains.
The General Director revealed that the continued decline in bank interest rates should encourage many tenants to switch from renting to owning by borrowing at a low interest rate and buying a home, because in many cases the instalments are close to the rental value.
He believed that, on the other hand, the UAE is moving towards enhancing sustainability in the real estate sector, with a focus on green buildings and environmentally friendly projects. This trend will lead to an increase in demand for real estate financing for sustainable projects. Design innovations and implementation of real estate projects will attract more investors, on the other hand.
Al Falahi stated that the UAE continues developing infrastructure to enhance its position as an attractive destination for real estate investments. Major projects such as expanding the metro network and developing new urban areas will also boost the attractiveness of real estate in the surrounding areas, which will lead to an increase in demand for real estate financing for these projects.
“The future prospects for the real estate financing sector in the UAE and Dubai look promising. With the continued reduction in interest rates, the increase in real estate investments, the development of infrastructure, digital transformation, and the enhancement of sustainability, the sector is expected to witness remarkable growth in the coming years,” he concluded.