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How inflation in Dubai will change real estate market in running year

Posted by UrbanTerrace on February 6, 2023

Inflation in Dubai is expected to have a impact on the real estate market in 2023. With rising prices, it’s becoming increasingly difficult for people to buy property globally. This article will analyze the effects of inflation on the real estate market in Dubai and how it will change in 2023. We’ll look at how inflation affects property prices, rental rates, and other factors that influence the real estate market. We’ll also explore some potential solutions that could help mitigate the effects of inflation on Dubai’s real estate market.

Despite looming economic uncertainties, property experts are confident that Dubai’s property market boom will not slow down significantly. Despite inflation rates set to rise, experts believe that the underlying fundamentals of the market remain strong and will continue to support its growth. Therefore, investors in Dubai should not be too concerned about any impact of inflation on their investments.

The real estate market in Dubai had a record-breaking year in 2022, with unprecedented growth and investment opportunities. However, this market may be facing a moderate halt in growth due to the recent increase in interest rates. This could significantly impact potential buyers and investors as higher interest rates will make it more difficult for them to purchase properties. This could also lead to a decrease in demand for properties across the region as well as an increase in vacancy rates.

The UAE has taken a decisive step to strengthen their economy by raising the base rate for the Overnight Deposit Facility (ODF). This change, which came into effect on February 2, 2023, is aimed at increasing liquidity and improving financial stability in the country. The new rate of 4.65 per cent is a quarter of a percentage point higher than the previous rate of 4.4 per cent and represents a significant move to support the nation’s economic growth.

The decision follows in line with recent actions taken by the US Federal Reserve which have seen them adopt similar policies to drive economic recovery worldwide. This decision will have a profound impact on financial markets within the UAE and beyond, as it affects borrowing costs for businesses and consumers alike.

Interest rates in Dubai

The rise in the Overnight Draft Facility has resulted in a shift in the economic landscape that must be addressed if businesses wish to remain profitable and competitive as this could lead to a decrease in demand, with potential consequences for businesses.

According to the most recent Insights data, around 70% of real estate deals in the UAE are typically done using cash. This is why any rise in interest rate will have minimal effect on the market.

The prices in 2022 increased by 11%, which is lower than the 16% increase in 2021, but the Covid-19-related cost reductions still made it a sizeable rise.

The market is currently buzzing with increased demand as high-net-worth individuals and foreign investors continue to pour money into the real estate sector. According to an early estimate by the Urban Terrace team, prices are expected to increase by 5-6 per cent this year. This means that property owners must prepare for higher costs in terms of mortgages, maintenance, and other expenses associated with owning a home. It is essential for individuals to understand the current market trends and plan accordingly if they wish to capitalize on their investments in real estate.

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