Today's Edition
MAYS IBRAHIM (ABU DHABI)
The recent interest rate cuts by the Central Bank of the UAE could have a lasting impact on housing affordability, buyer behaviour, and investor sentiment in the UAE's real estate sector, industry experts say.
Last month, the Central Bank of the UAE (CBUAE) cut the Base Rate applicable to the Overnight Deposit Facility (ODF) by 25 basis points from 4.40% to 4.15%, effective September 18.
The move followed the US Federal Reserve's first interest rate reduction in nearly a year, setting a target range of 4.00%–4.25%.
In an interview with alet, Martin Kocher, partner at Gravity Power Management Consultancies in Abu Dhabi, said the interest rate reduction, which means lower borrowing costs, is a welcome shift for buyers, particularly in the mid-market and affordable housing segments.
These cuts are likely to fuel demand for two- to three-bedroom units in mixed-use, family-friendly areas, and also stimulate interest in villa communities, according to Kocher.
As long as supply in the affordable and midmarket section can absorb the increased demand caused by cheaper mortgage rates, he expects prices to remain stable and affordable.
Kocher also pointed out that the rate cuts align with broader government policies to address housing affordability.
"As housing prices have increased in the double digits year over year in most emirates driven by strong foreign demand, so has the barrier to home ownership for new homebuyers. To address this asymmetry and mitigate the impact on the UAE's Citizens and Residents, the government has announced projects to deliver tens of thousands of housing units."
In September, UAE President His Highness Sheikh Mohamed bin Zayed Al Nahyan attended the announcement of agreements to develop 13 new residential communities in Abu Dhabi, delivering over 40,000 homes and residential plots for Emirati citizens, with a total cost of Dh106 billion.
The agreements, signed by the Abu Dhabi Housing Authority and the Abu Dhabi Projects and Infrastructure Centre (ADPIC) with several property development companies, include the construction of 25,244 housing units worth Dh94 billion and 14,876 residential plots valued at Dh12 billion.
"The recent rate cuts from the UAE Central Bank, combined with housing affordability initiatives from both federal and Emirate-level governments, signal a clear intent for economic recalibration," Kocher noted.
He argues that this move will trigger a "rebalancing" that allows asset prices to more accurately reflect the natural rate of absorption, which is essential for a healthy housing market.
"By making borrowing costs more affordable, especially for those who stand to benefit most from housing, the market can better absorb the hundreds of thousands of off-plan units scheduled for completion in the next couple of years," Kocher explained.
This move ultimately strengthens the UAE's position as a stable economy in times of global volatility, he added.
"For homeowners, this translates to more affordable housing. For investors, it suggests healthy capital appreciation, stable tenant retention, and increased long-term market confidence due to reduced volatility, thereby enhancing exit and resale opportunities."
From an investment perspective, Stewart Kirkham, a real estate development executive, said ready properties in established prime locations currently offer the most value, avoiding the risks of off-plan delivery delays.
"In the Dubai off plan market, cash buyers and payment plans dominate roughly two thirds of total sales and bypass traditional financing, so the rate cut will likely have a minimal impact," he told Aletihad.
Foreign buyers – particularly from India and Pakistan – also face currency headwinds that may offset borrowing benefits, Kirkham added.
The real estate expert also pointed out that the UAE remains attractive for global investors due to strong leadership, Golden Visa programmes, and unmatched connectivity across its emirates.
"The UAE is also not limited to one market; Abu Dhabi, Ras Al Khaimah, Ajman, and Sharjah offer different risk reward profiles suitable for many investors," he said.
The updated Summary of Economic Projections showed most voting members expect a further 50bps of cuts this year, likely in two additional 25bps moves.
The next Federal Open Market Committee meeting will be on October 28-29.
Emirates NBD researchers predict that the Fed will need to cut rates next year, targeting an end of 2026 Fed Funds rate at 3%.
