Despite the turbulence troubling other parts of the Middle East, the residential housing market in Dubai, the capital of the United Arab Emirates, is continuing to show signs of strong growth. Developers in the UAE are reporting another banner year for Dubai’s housing market, with a surge in sales in 2023 over 2022.

After the pandemic of 2020-2021, a post-pandemic rebound followed, powered initially by Russian buyers seeking to shield their assets from sanctions imposed on Russia after its invasion of Ukraine in February 2022.

Then, in March this year, the UAE introduced a flexible work permit allowing people with demonstrable skills to take freelance jobs in Dubai. An influx of digital nomads from Europe and North America followed, looking to settle in a tax-free, amenity-rich environment.

Migrants living in Dubai

“There’s so much movement here. So many different opportunities take place in whatever domain you are,” Kevin Tabba, a 24-year-old from Irvine, California, told The Media Line.

“I primarily work in tech, and it’s super easy to access east and west, which is excellent for developing my business,” he said.

Tabba said he had been to buy a two-bedroom condominium in the town of Jebel Ali for $400,000. Such a purchase would not have been possible “in either Los Angeles or Miami,” he said.

Perhaps because of the affordable real estate, Dubai tops global Google searches for places to which to move, ahead of New York or Paris.

For Dora Samoodi, a 39-year-old Iranian, moving to Dubai was a choice to prioritize personal freedoms and tax advantages.

“When you buy a property here, you don’t pay tax on it,” Samoodi told The Media Line. “It’s a great place to live. There’s a lot of freedom. Women are empowered here. You can do anything. You can work.”

According to the Dubai Land Department, $26.6 billion worth of property was sold in the third quarter of this year, a 40% increase from the same period in 2022. The number of transactions increased 22% from last year, reaching 31,216.

Emaar Properties, the largest luxury property development company in the UAE, reported $7.9 billion in sales in the first nine months of 2023, marking a 25% increase over the same period last year.

“Despite the challenges caused by the pandemic, we persevered and continued to build,” Waleed Mohammad AlZoubi, chairman of the Tiger Group development company, told The Media Line.

“Although the pandemic caused a decline in growth, profits, and business, the UAE remained a global leader in managing the crisis,” he said.

In 2020, annual Tiger Group sales were about $500 million. In the first nine months of 2023 alone, the company, which recently built 19 new towers, sold $1 billion in apartments.

“The massive growth in Dubai is beyond words,” AlZoubi said. “The population has multiplied by three times in the past 20 years, when this area was all sand. Nothing was here before, and very quickly, we developed it.”

AlZoubi said that many wealthy immigrants from the developing world were attracted to the UAE because of its strong pandemic response and digital infrastructure.

“Soon after, we saw more Americans come to Dubai for the same reasons they moved to places like Miami,” he said.

While Russians drove the post-pandemic sales surge that pushed Dubai home prices up about 30% in the past two years, the ruble’s decline since then has seen a slowing in demand from Russian buyers.

Tatjana Lescova, Dubai-based associate director of corporate ratings at S&P Global, told The Media Line that she expects the market to cool in the near future.

“Price increases will slow down or decline slightly during the next 12 to 18 months, but I don’t expect significant turmoil in the real estate market,” she said.

Akmal Abdelfatah, a professor of civil engineering at the American University of Sharjah, said that new groups of buyers will likely lead to a continued expansion of Dubai’s real estate market.

“I have lived in the city for long enough to see declines quickly reverse,” Abdelfatah told The Media Line. “We’re seeing buyers from India step in now, the way Russians did during the Ukraine war.”

He said the lack of income tax and property tax in Dubai has made the city attractive to people of many nationalities.

Source : TheJerusalemPost

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Average house prices in the UK will fall by 1% next year as competition increases among sellers, Britain’s biggest property website has forecast.

Sellers were likely to have to price more competitively to secure a buyer in 2024, while mortgage rates would settle down though “remain elevated”, said Rightmove.

A year ago, Rightmove predicted that average asking prices would fall by 2% in 2023. On Monday, the company said the average was 1.3% lower than in 2022 as the property market continued to contend with significantly higher mortgage costs and a cost of living crisis that refused to go away.

The website records asking prices rather than the actual one properties are sold for. It said it was predicting that these would typically be 1% lower nationally by the end of 2024. The market was continuing its transition to “more normal levels” of activity after the busy post-pandemic period, it added.

Rightmove said the number of sellers who had had to cut their asking price during 2023 had risen to 39%, compared with 29% last year and 34% in 2019.

Tim Bannister, a property expert at Righmove, said: “An average drop of 1% in prices reflects our prediction that it’s likely to be another muted, and in parts challenging, year for some buyers and sellers in 2024.” But he added: “The better-than-anticipated activity this year has shown that many buyers are still getting on with satisfying their housing needs, and there is considerable opportunity for sellers and their agents to attract these buyers with the right pricing.”

On Friday, Nationwide building society surprised some observers when it announced that prices were up 0.2% month on month in November, after a 0.9% increase in October and a 0.1% rise in September. However, it said that on a year-on-year basis, prices were down 2% in November.

Last week, the property website Zoopla said market conditions were the best for buyers since 2018, when Brexit uncertainty hung over the market.

There was better news for people having to remortgage next year. The mortgage broker John Charcol predicted on Friday that the rates on some new fixed-mortgage deals could dip below 4% by mid-2024.

Rightmove said average mortgage rates had now fallen steadily since July, “providing movers with much more stability and certainty over the type and cost of mortgage offer they are likely to receive”.

But while the outlook for mortgage rates had improved, with many commentators believing interest rates may have peaked, the property website said: “Affordability remains stretched for many buyers.”

As the Bank of England signals that any cuts to its base rate are not imminent and that borrowing costs are likely to remain elevated during 2024, “some buyers’ spending power will remain limited”. said Rightmove.

Source : TheGuardian

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UK house prices unexpectedly rose last month, according to Nationwide building society, with some economists who had predicted a fall calling it a “massive surprise”.

The 0.9% month-on-month increase – which added more than £1,600 to the cost of a typical property – has been linked to a shortage of homes on the market for buyers to choose from. The last time Nationwide’s index showed a bigger monthly increase was in March 2022.

However, Britain’s biggest building society said the average property value was still down year on year – with a 3.3% drop in October compared with the same month last year. This is down from an annual drop of 5.3% recorded in September.

Nationwide said the average price of a UK property was £259,423 at the end of October – up from £257,808 a month earlier.

Robert Gardner, the lender’s chief economist, said: “The uptick in house prices in October most likely reflects the fact that the supply of properties on the market is constrained.”

Sarah Coles, the head of personal finance at the investment platform Hargreaves Lansdown, said: “October’s bump comes down to a shortage of property for sale, making it more difficult for buyers to drive a hard bargain.” Sellers “sat on their hands” in October, she added.

Gardner said there was little sign of “forced selling”, which would exert downward pressure on prices, as labour market conditions were solid and mortgage arrears were at historically low levels, despite difficulties for some homeowners.

Other commentators said the Bank of England’s decision on 21 September to keep interest rates on hold after a string of increases gave an autumn fillip to the housing market and would have calmed the nerves of many would-be buyers.

The housing market in Britain has slowed in recent months as the Bank has raised rates sharply to counter a rise in inflation triggered in part by Russia’s invasion of Ukraine, which sent energy prices soaring.

Gardner said that, despite last month’s unexpected bump, UK housing market activity had “remained extremely weak”, with only 43,000 house purchase mortgages approved in September – about 30% below the monthly average in 2019.

He added: “Activity and house prices are likely to remain subdued in the coming quarters. Despite signs that cost of living pressures are easing, with the rate of inflation now running below the rate of average earnings growth, consumer confidence remains weak, and surveyors continue to report subdued levels of new buyer inquiries.”

Imogen Pattison, an assistant economist at the consultancy Capital Economics, which had forecast a 0.6% fall in October, said last month’s large increase in house prices “was a massive surprise, given higher mortgage rates should be severely restricting the number of people able to buy and the amount they can spend”.

Most experts agreed that this was not the start of a recovery for the property market.

Last week, Lloyds Banking Group predicted UK house prices would continue to slide this year and in 2024, and would not start to recover until 2025.

Santander expects a larger drop of about 7% for the whole of 2023, followed by a 2% fall in 2024. The estate agent Knight Frank also predicts a 7% fall this year but a 4% decrease next year.

Source : TheGuardian

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Three charts that tell all about UK property

Welcome back, hope you had a good weekend. We’re talking about the UK housing market again today. I’ll warn you in advance, it’s a bit of a chart-fest — there’s a whole three of them. But hopefully you’ll find them useful.

The story so far: UK house prices have fallen a little — about 5% in nominal terms, significantly more in real (after inflation) terms — since peaking in summer last year (I’m using Nationwide data).

Given the extraordinary rise in interest rates over that period, it may seem surprising (and, for first-time buyers, frustrating) that prices have apparently remained so resilient.

However, there has been a crash in the market. Not in prices, but in transaction levels. And last month, that continued, as the latest Bank of England figures demonstrate.

The number of mortgage approvals for new home purchase dropped to just above 43,300 in September. That was down from just under 45,500 in August, and about a third lower than the same time last year.

As the chart below shows, this is not a “normal” market by any stretch of the imagination. In the period between the end of the last housing bust (around 2013) and the start of the pandemic in early 2020, mortgage approvals were running between 60,000 and 70,000 a month. So this is a seriously becalmed market.

For a different perspective on just how quiet this is, the chart below is even more striking. It shows that on a net basis, as a nation of homeowners, we actually paid more towards our mortgages than we took out in new borrowing last month. That’s highly unusual, as the chart below shows.

Even in the depths of the 2008 bust, net mortgage lending very rarely went negative and never to the extent we’ve seen this year. No wonder your local estate agent is looking stressed. (If you’re wondering what the spike up and down in 2021 was, that was a stamp duty holiday — so everyone got their deals in at the last minute, distorting the figures).

It’s All About Interest Rates

What’s going on? If you hadn’t already guessed, you’ll find it’s pretty clear when you look at this final chart. This shows that the average interest rate charged for a new mortgage reached just over 5% last month, while the average rate on outstanding debt climbed to 3.14%. Both are now at their highest levels since prior to the 2008 crash.

Now, I would expect that white line to start topping out around about now. You can get new mortgage loans at around or below 5% pretty widely today, depending on the product you opt for and the size of deposit you have. But that blue line is going to keep rising for a while yet as more and more people have to remortgage.

Note also that remortgage levels are currently near record lows — September saw the lowest number of remortgages since January 1999. However, this only captures remortgaging done with a different lender. If you stick with your current lender, the remortgage is not recorded.

Why are more people sticking with their current lenders rather than shopping around? The obvious reason is because that way they avoid being subject to new affordability checks, which in turn suggests that a surprising number of people are worried that they’d fail said checks. That does not necessarily bode well for financial resilience.

Anyway, getting back to that white line — you can see that even if it were to drop back to 4%, say, it would still be well above the average for the past decade or more. That means the pressure on the housing market and on prices will continue.

When mortgage rates rise, the amount of money a potential buyer can borrow at a given monthly mortgage payment goes down. In turn, that means the buyer’s overall budget — the amount he or she can offer to pay for a house — goes down. Sellers still want the peak price for their properties, but buyers can no longer afford to pay those peak prices.

At that point, a buyer can do one of three things. You can give up looking and decide to rent or stay in your current home. You can drop your expectations — go for a two-bedroom flat rather than a three-bedroom house, say. Or you can start making “cheeky” offers in the hope that the lack of competition will persuade a seller to drop their price.

This is exactly what’s happening right now. According to property portal Zoopla, the areas and sectors being hit hardest are those where properties are more expensive — so bigger family homes versus flats, and homes near London versus those in less expensive areas.

Meanwhile, sellers are adjusting prices slowly and reluctantly. In the absence of wider economic distress, that’s exactly what you’d expect to happen. But in the longer run, a mixture of estate agent desperation and a widening acceptance of reality is likely to keep them grinding lower. That’s assuming we don’t run into serious economic turmoil in the meantime.

In short — the housing market remains in deep freeze, but the drip, drip of rising interest rates and gently falling prices will, I suspect, result in the correction continuing, regardless of what the Bank of England does with interest rates this week.

Source : Bloomberg

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UK house prices fell at the fastest annual rate in 14 years in September, as high mortgage costs fuelled a sixth consecutive monthly drop in a “buyer’s market”, according to Halifax.

Halifax, Britain’s biggest mortgage lender, said prices fell by 4.7% in September, the biggest year-on-year decrease since 2009.

The average price of a typical UK home fell to £278,601, down from £292,197 in the same month last year. Halifax said higher mortgage costs were likely to weigh on prices into next year.

House prices fell 0.4% month on month in September, the sixth fall in a row, albeit smaller than the 1.8% drop in prices in August.

“Activity levels continue to look subdued compared with recent years,” said Kim Kinnaird, the director of Halifax Mortgages. “Borrowing costs are the primary factor, given the impact of higher interest rates on mortgage affordability. Against this backdrop homeowners inevitably become more realistic about their target selling price, reflecting what has increasingly become a buyer’s market.”

Figures published last month showed that UK mortgage approvals fell in August to their lowest level in six months as high interest rates cooled the housing market.

The Bank of England said net mortgage approvals for house purchases fell from 49,500 in July to 45,400 in August and were down by a third from the same month last year.

Last month, the Bank of England kept interest rates on hold for the first time in almost two years, ending a run of 14 consecutive increases and raising the prospect that a peak in borrowing costs had been reached as lenders finally began to cut rates on mortgage deals.

“With the base rate now likely to be at or around its peak, we are seeing fixed rate mortgage deals ease back from recent highs,” Kinnaird said.

However, she added that the base rate was likely to remain high for an extended period, until inflation got back to the target of 2%, meaning mortgage rates were likely to remain high for some time.

“Overall, these factors are likely to keep mortgage rates elevated in comparison with recent years,” she said. “Constraining buyer demand and putting downward pressure on house prices into next year.”

A separate survey by the Office for National Statistics found that 40% of people currently paying rent or a mortgage are finding it difficult to afford these payments, up from 30% at the same time last year.

Despite the fall in house prices in September, Halifax said the average home was still worth almost £40,000 more than in March 2020, when the UK went into lockdown.

Source : TheGuardian

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UK house prices experienced their biggest annual fall in 12 years, according to Halifax, the latest sign that soaring interest rates on mortgages is bringing a halt to the housing boom.

The average price of a UK home tumbled 2.6% year on year last month, the largest annual decrease the lender has reported since June 2011, a significant acceleration from the 1.1% decline record in May.

Up until May, Halifax – which said that the average house price fell by 0.1% in June, the third consecutive monthly decline – had not reported a year-on-year fall in UK house prices since December 2012. The average price of a home in the UK is now £285,932, £8,000 lower than the peak last August according to the lender.

“The housing market remains sensitive to volatility in borrowing costs,” said Kim Kinnaird, the director of Halifax Mortgages. “Concerns about persistent inflation have led to a significant increase in the cost of funding. The resulting squeeze on affordability will inevitably act as a brake on demand, as buyers consider what they can realistically afford to offer.

“How deep or persistent the downturn in house prices will be remains hard to predict. With markets now forecasting a peak in Bank Rate of over 6%, the likelihood is that mortgage rates will remain higher for longer, and the squeeze on household finances will continue to put downward pressure on house prices over the coming year.”

Two-year fixed-rate mortgage rates have continued to climb past 6% after the Bank of England increased interest rates by half a point to 5% in June in an attempt to curb stubbornly high inflation.

“This slow puncture softening in house prices reinforces the message from other recent surveys that financial markets pricing in further interest rate increases is not helping buyer confidence,” said Jeremy Leaf, a north London estate agent and a former residential chair of the Royal Institution of Chartered Surveyors.

“On the ground, sales are still proceeding, often to those who are not dependent on mortgage finance, but they are taking longer and often involve protracted renegotiations resulting in modest rather than large, price falls.”

Halifax said that despite recording the third consecutive monthly fall in house prices, they remain up 1.5% since the beginning of 2023 because of growth in the first quarter.

Kinnaird said that the figures showed a “degree of stability in the face of economic uncertainty”, with the volume of mortgage applications “holding up well” in June.

However, signs of the increasingly faltering housing market in the short-term were highlighted by the latest HM Revenue and Customs figures, which showed home sales fell by 27% year on year in May.

There were 80,020 completed transactions in May, a 3% drop on April, according to a HMRC release on Friday. The report said the decline was partly down to extra bank holidays last month but also pointed to a “decline in general market conditions in recent months”.

Figures from the low-cost housebuilder MJ Gleeson also underscored the market slowdown as house sales slumped more than a fifth year on year in the six months to the end of June.

While the company said that house prices remained “resilient”, the average price increased 11.3% to £167,300 during the year, and it noted a “significant shift” in buyer demographics in recent months.

In the first half of this year the proportion of first-time buyers slumped from 71% in the same period last year to about 50%. Meanwhile, the proportion of buyers over 55 doubled from 10% to a fifth of all sales.

Overall, MJ Gleeson’s annual house sales dropped from 2,000 in its last financial year to 1,723 in the year to the end of June.

Source : TheGuardian

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The Australian housing market is experiencing a significant resurgence as house prices continue to soar, fuelled by various factors, including rising demand from international buyers and a surge in migration.

According to Forbes, Australian house prices have been steadily climbing, reaching new heights in recent months. CoreLogic, a leading property data and analytics provider, supports this finding, revealing that Australia’s capital cities have recorded the strongest annual rental increase in history. The demand for rental properties has been consistently high, contributing to the overall growth of the market. 

Home sales are on a growth trajectory as well, with key cities listing positive numbers. Sydney, for instance, ranked ninth in the world for sales of properties valued at AUD10 million and above, as per realestate.com.au. This demonstrates the high demand for luxury properties in the city. 

Notably, the Gold Coast has emerged as one of the most sought-after regions in Australia, with homes in the area receiving high levels of attention from potential buyers. Realestate.com.au noted that Gold Coast homes are among the most viewed properties across the country, emphasising the growing popularity of this coastal city. 

Source : AsiaPropertyAwards

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There will be no government handouts for the hundreds of thousands of homeowners facing crippling increases in monthly mortgage repayments after the Bank of England’s decision to raise rates to 5%. To do so would defeat the object of the interest rate rise – to cool down the economy – and prolong the inflation crisis. Further rate rises look likely as inflation proves more sticky in the UK than many other high-income economies.

The government is instead opting to get the UK’s major banks to agree to a voluntary “mortgage charter”. This involves offering forms of temporary relief such as short-term switches to interest-only repayments, as well as extending the period between missed payments and forcible home repossession. Labour has proposed a similar response. This is sensible. Banks should be well placed to absorb some reductions in returns, being better capitalised and enjoying high returns on their lending on the back of recent interest rate rises. But if rates stay higher for longer, additional assistance may be needed to avoid repossessions.

But the political firestorm around rising mortgage rates needs to be put in the wider context of the UK’s broken housing market. The outcry over the many homeowners who face paying more than 20% of their disposable incomes in mortgage repayments will get short shrift if you’re one of the four in 10 renters under the age of 30 who have been paying out more than 30% of your monthly income on rent. Furthermore, many mortgaged homeowners have enjoyed enormous tax-free capital returns on properties bought over the past 15 years, as house prices have increased by around 86% on average since the post-crisis trough of 2008.

Indeed, the lack of political or media outrage at the government’s decision to indefinitely freeze local housing allowance rates in April 2020 stands in marked contrast to the “mortgage timebomb” furore. Since then, as a recent report by the Institute for Fiscal Studies shows, rents for new lets have risen by more than a fifth on average in the UK, in part due to rising interest rates which increase the demand for rental properties. This meant that in the first quarter of 2023 only 5% of private rental properties were affordable for housing benefit recipients, down from 23% in 2020. The same report also found that the quality of both private and socially rented housing had become significantly poorer.

But calls for unfreezing housing benefit have been ignored so far. One risk with raising housing benefit in an unregulated private-renting sector is that it only enables landlords to increase rents. The obvious way to deal with this is to introduce rent controls, which are now being employed in Scotland and have been called for by Sadiq Khan in London. Evidence suggests that rent controls are effective in reducing rents, but can lead to a fall in the supply of private rental accommodation. If more such properties are then sold to first-time buyers this may not be viewed as a problem. But given current affordability problems, what the UK clearly needs is more non-market and good-quality socially rented housing.

Could the mortgage crisis offer an opportunity to reset the market for renters and homeowners? One option for homeowners facing repossession or poverty due to unaffordable mortgages, as proposed in a recent report for the Joseph Rowntree Foundation, would be for the government to support social landlords to buy the homes of mortgaged homeowners, pay off their mortgages and convert the properties to the socially rented sector. The government could fund any negative equity gap and homeowners could continue to live in their properties as social tenants, paying a rent to the government. This would shift the risk caused by the rate rises away from individuals and on to the state – but in return the state would receive an equity stake and flow of rental income, and could expand the supply of affordable housing. A similar approach could be taken by buy-to-let landlords who are in distress and seeking to exit the sector.

The situation also demonstrates the need for a major rethink of the mortgage market in the UK. The UK is unusual in placing such interest rates and credit risks on individual households, being dominated by short-term fixed-rate mortgages of two to five years. In the US, Canada and much of Europe, much longer-term fixed-rate mortgages of 20-25-years are the norm and mortgage insurance is also more common. There is a good case for introducing longer-term fixed-rate mortgages and insurance for first-time buyers with high loan-to-value or loan-to-income ratios, in order to reduce financial risks and avoid the kind of scenario we are seeing play out today.

However, the danger of such a plan is that it would lead to even more mortgage debt flowing into the housing market and would further drive up house prices, as evidence suggests poorly targeted help-to-buy schemes have done. To prevent this, the government needs to correspondingly reduce the investment demand for housing from those people who already own. Existing owners and larger investors enjoy a major advantage in the mortgage market as they can use existing property as collateral for loans, and access larger and cheaper loans with smaller or even zero deposits. This advantage can most easily be removed with property tax reform, with higher taxes on buy-to-let income and second homes. Reforms to make buy-to-let mortgages less attractive would also help.

For most of the 15 years since the great financial crisis, historically low mortgage interest rates have led to a surge of investment into housing, pushing prices ever-higher and disproportionately benefiting anyone lucky enough to have managed to buy a home. Lower-income groups have seen their prospects of home ownership disintegrate while experiencing rapidly rising rents relative to their incomes.

Mortgaged homeowners are facing a bleak few years and solutions are needed. But we can’t lose sight of the fact that renters have been facing the same problem of unaffordable housing costs for too long, and with little relief in sight.

Source : TheGuardian

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