Inayat-ur-Rahman, Business Editor

After a record-breaking 2022, Dubai real estate may witness a moderate halt in growth due to the increase in interest rates. With effect from February 2, 2023, the Central Bank of the UAE raised its base rate for the Overnight Deposit Facility (ODF) by a quarter of a percentage point to 4.65 per cent from 4.4 per cent after the US Federal Reserves’ eighth increase in the policy rate to bring inflation down towards its target range of two per cent.

“As the ODF was raised to 4.65 per cent from 1.5 per cent in 2022, the purchasing power of consumers was impacted. This may result in reduced demand, which, ultimately, can impact property prices,” according to the Zoom Property Insights.

The latest Insights data further disclosed that roughly 70 per cent of real estate transactions in the UAE are mostly carried out in cash. This is why the impact of the rising interest rate is going to be marginal on the market.

Ata Shobeiry, CEO of Zoom Property, believes that the impact will be limited and the market will continue its growth.

“The year 2022 concluded on a remarkable note for the Dubai property market as it broke several records. However, 2023 may see the real estate sector heading in a different way, partly due to the rising interest rate and the way it’s impacting consumers’ purchasing power. Of course, there will be growth but not at par with the previous year,” he said.

The year 2022 witnessed a little over 11 per cent price growth. It was down from nearly 16 per cent in 2021, but that was mostly due to reduced prices because of the Covid-19 pandemic. As per an early estimate by the Zoom Property Insights, prices are expected to increase by 5 per cent this year due to strong demand in the market as high-net-worth individuals (HNWIs) and foreign investors continue to pour in and invest in the sector.