UAE real estate: Mortgage financing has promising outlook

Khaleej Times

a day ago

The UAE's real estate mortgage financing market in 2025 is poised for robust growth, driven by strong market fundamentals, investor confidence and an array of economic and regulatory factors, experts say.
Top executives and industry specialists said the market has seen strong demand due to rising expatriate populations, robust tourism, and an increasing number of residents seeking homeownership. The government's initiatives, including the introduction of long-term visas and ownership reforms for expatriates, have further stimulated interest in real estate investments.
'The market benefits from competitive mortgage rates, with some banks offering rates below 4%, undercutting the UAE Central Bank's benchmark. Flexible financing options, such as 70-30 and 80-20 payment plans, have eased access to homeownership, boosting demand, particularly in Dubai, where mortgage transactions surged 4.76% in the first quarter of 2025,' they said.
The UAE's currency peg to the US dollar ties mortgage rates to US Fed decisions, with expectations of modest rate cuts fostering affordability. Government initiatives, including relaxed ownership laws and long-term visas, attract foreign investors, while a growing population and tourism drive demand for residential properties.
The market is projected to grow steadily, with a focus on affordable housing and sustainable developments. However, challenges like rising construction costs and potential global market volatility could impact financing conditions.
'With banks stepping in to finance off-plan properties and a 24% year-on-year increase in mortgage volumes in Dubai, the UAE's mortgage market remains a key catalyst for real estate growth, offering opportunities for both domestic and international buyers.'
Cash Buying Versus Mortgage Financing
Engineer Amer Khansaheb, Chief Executive Officer and Board Member, Union Properties, said traditionally, Dubai has been a cash-dominant property market, particularly in the luxury segment, where high-net-worth individuals prefer the speed and flexibility of cash transactions.
'In recent years, we have seen a steady and healthy shift towards a more balanced mix of cash and mortgage-financed purchases. This shift reflects evolving buyer profiles and market conditions,' Khansaheb told BTR.
He said mortgage financing is gaining notable traction, especially among end-users, residents, and mid-income buyers. Increasingly, family buyers and long-term residents are turning to bank financing as a more sustainable route to homeownership, rather than committing large upfront capital.
'Supporting this trend, banks in the UAE have eased mortgage conditions, offering more competitive interest rates, some now below 4%, and extended post-handover payment options. Financing structures such as 70-30 or 80-20 plans are also offered by banks, making it more accessible and helping bridge the affordability gap for a wider segment of the population,' he said.
'As the market continues to stabilise, we expect mortgage-financed purchases to grow steadily in the coming months. At Union Properties, we see this shift as a positive development. It reflects a market that supports sustainable growth by encouraging long-term investment over speculative buying,' he said.
Arran Summerhill, Chief Operating Officer of Holo — the Middle East's first digital mortgage platform as part of the Wamda X programme, echoed similar vies and said mortgage financing is growing at a steady pace in the UAE.
'Cash still reigns, but mortgage financing is gaining fast. First quarter 2025 data highlights D33 billion in cash deals versus Dh21 billion in financed purchases in Dubai. That said, mortgage penetration is rising. The sentiment in the market has shifted, and we are seeing many more end users entering the market along with investors. Historically, the market was dominated by investors,' he said.
Mortgage Financing Rising
Summerhill agrees that the UAE mortgage market is an indirect beneficiary of the UAE's post-pandemic property boom, fuelled by foreign investment and the government-led reforms.
'Absolutely, and early 2025 numbers illustrate it vividly. In January, Dubai recorded its first month-on-month property price dip since summer 2022, a slim 0.57% drop to Dh1,484 per square foot, yet that didn't slow the deal flow as a record-breaking 14,413 transactions were signed that month, and mortgage sales jumped 6.8% month-on-month to 4,134 loans. Zooming out, first quarter of 2025 across the UAE saw Dh239 billion in real estate trades encompassing 94,719 transactions,' Summerhil told BTR.
In Dubai alone, he said Dh41 billion flowed via 10,949 mortgage transactions, a 27% increase in mortgage deal volume compared to first quarter of 2024. So yes, the property boom isn't just driving asset value, it's propelling mortgage growth, boosting banks, and deepening the financing ecosystem, which has driven pricing competition.
Protecting stakeholders interests
Summerhill said the Central Bank of the UAE is signalling a positive approach to governance with a higher level of governance in banks, insurers and finance houses. This ultimately benefits the consumers knowing that there information is being managed and stored correctly whilst being sold the correct products.
'Whilst the central bank governs these entities, brokerages are governed under RERA which also has strict rules relating to consumer protection and cold calling. Despite this it is recommended to stay vigilant with where your documents are being sent and stored whilst ensuring you are receiving the best advice on products available.'
To a question about the challenges to mortgage financing market, he said there is a need to introduce reforms to secure interests of the stakeholders.
'Since 2020 to mid-2025, we have seen an increase in property pricing of 124%, whilst this is the case, we have not seen any reform in the caps put in place for maximum loan financing,' he said.
For a purchase under Dh5 million, he said a buyer is required to put a 20% deposit as an expat and 15% deposit as an Emirati while for over Dh5 million this changes to a larger down payment.
'Given the normal family home prior to 2020 was sub Dh5 million, it is likely this has significantly increased, which is forcing families to consider other options to cater to the availability of funds. Despite these challenges, we have yet to see a major impact on buyer sentiment,' he said.
Long-term Mortgage Financing
About long-term mortgage financing to own a property in the UAE, Summerhill said it's evolving into something tangible.
'Expat LTVs remain at 80% for first-time buyers, with many lenders offering five-year fixed rates as low as 3.99 – 4.24%. With UAE banks growing lending portfolios by 27% year-on-year basis in January-March 2025 quarter, mortgage appetite is gathering momentum this create competition within rates, benefiting consumers,' he said.
'Whilst the long-term mortgage is not a dream for consumers, it is a means to step onto the property ladder and make a house a home. The average life cycle of an expat in the UAE has significantly increased, and having paid rent for five years plus, many believe that making the step to buy a property is a financial decision and lifestyle decision which will benefit them in the long run,' he added.
In conclusion, the UAE's real estate mortgage financing market outlook remains positive, supported by favourable economic conditions, regulatory support, and evolving financing solutions. The market is expected to attract both local and foreign investors in the coming years.