The latest US Federal Reserve benchmark interest rate cut of 25 basis points to 3.75 percent on October 29, 2025 – the second rate cut in a month – is expected to help ease mortgage borrowing cost in the UAE, as the UAE Central Bank also followed this by reducing interest rate by 25 basis points to 3.90 percent, the same day, down from 4.15 percent, as its currency, dirham is pegged to US dollar.

Additionally, the global trade tariff war led by the United States could see an increase in investment in manufacturing sector in the UAE – as industries might locate to the country due to low-tariff for US-bound exports. If that happens, many workers, professionals will relocate to the UAE – that will add to the growing demand for homes.

The Fed's latest cut brings the target for its key lending rate down to its lowest level in three years, easing borrowing costs across the US. A slowdown in job hiring prompted the Fed to restart its rate cutting cycle in September. In a policy statement on Wednesday, the central bank reiterated that“job gains have slowed this year” and that the unemployment rate, though still low through the end of summer, has now“edged up”, according to news reports.

This UAE Central Bank's follow-through decision underscores the UAE's alignment with global monetary eco-system and supports its continued economic strength driven by non oil growth and global connectivity.

For the UAE, the effects will be felt most directly in lending costs, mortgage affordability, and real estate activity, sectors that have shown remarkable dynamism in recent years but remain sensitive to shifts in borrowing costs.

The timing could prove positive for the UAE's property market, which has experienced an extraordinary rally since 2021. Property prices and rents in Dubai rose more than 20 per cent last year in selected locations and properties and continued to climb through mid-2025, driven by foreign inflows, population growth, and demand for super-prime residences.

For property buyers in the UAE and particularly in Dubai, this development brings significant benefits. Given lower benchmark rates, home loan costs may become more favourable offering extra leeway for financing decisions and enhancing affordability for both end users and investors.

As interest rates remained elevated, mortgage demand showed signs of moderation, particularly in the mid-market and affordable segments. A shift to cheaper financing would immediately ease pressure on buyers who had been holding back due to high borrowing costs, potentially broadening the base of demand beyond cash-rich investors who have dominated the market.

Developers and brokers expect this to inject fresh momentum into sales volumes. In Dubai, mortgage transactions fell marginally in the first half of 2025, even as overall sales hit record levels, a sign that higher rates had deterred leveraged buyers.

Lower borrowing costs could reverse that trend, opening up access for residents and expatriates aiming to transition from renting to ownership. Abu Dhabi, which has recently rolled out new luxury projects and expanded its waterfront offerings, would also stand to benefit from improved mortgage affordability.

Although it is unclear whether the UAE's property market's current upward cycle has reached its peak or near peak, developers and brokers are witnessing strong investor and buyer appetite across the UAE's key market – Dubai, Abu Dhabi, Sharjah, Ajman and Ras Al Khaimah.

In the first nine months of 2025, Dubai's real estate market saw significant growth, with nearly Dh500 billion in sales from approximately 158,200 transactions, up about 32 percent in value and 20 percent in volume compared to the same period in 2024. Sharjah also experienced its strongest-ever performance, with Dh44.3 billion in deals and over 80,320 transactions in the first nine months, a 58 percent increase in value.

Continued socio-economic and political stability, effective leadership in creating the safest and most secured environment, is helping the UAE attract massive investment in real estate – that continued its bull run since the COVID-19 pandemic recovery in 2021.

Some of the key reasons behind this continued growth include global connectivity, world-class infrastructure, safe and secure environment, best business environment, most efficient ports and airports infrastructure, digitised government processes, good quality of life, among others. These unique selling factors are attracting the global business community, professionals and the wealthy and super wealthy people to shift their businesses in the UAE.

The growth of the UAE real estate market is driven by a combination of factors including strong population growth from migration, a robust and diversifying economy, government incentives like tax breaks and long-term visas, and significant investment in infrastructure and strategic global events. These elements create a favourable environment for both foreign and domestic investment by attracting a larger workforce, boosting overall demand for housing and commercial spaces, and enhancing the country's reputation as a stable, high-quality place to live and do business.

Investment in property gives an investor/buyer a 6-8 percent net return per year on assets – which is higher than most investment products. Moreover, the price appreciation of the asset is another great reason for investors to invest in real estate in the UAE, especially Dubai.

The writer is Chairman and Managing Director of Nisus Finance.

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