A glimpse on mortgage matters in the UAE

A glimpse on mortgage matters in the UAEWarren Philliskirk

Despite a cooling realty sector, Dh1 billion worth of mortgage transactions are being recorded every month in Dubai. While the majority of these transactions are in cash, many experts say the number of speculative investors has declined significantly.

''It's still a 60:40 ratio with cash buyers being a larger component of the buyers' market in Dubai,'' says Warren Philliskirk, Managing Director of Mortgage International, a Dubai based mortgage broker who sat down to discuss new trends in the mortgage market. ''But of the mortgage takers, 99 per cent of them are end users. There are investors in Dubai, but they are not those intending to flip property.

''Instead, these people are serious investors looking to rent out their property long term.''

Philliskirk also notes that the mortgage cap announced by the UAE Central Bank was disenfranchising genuine end users from the real estate market.

Speaking about the mortgage situation in Abu Dhabi, Philliskirk says it is a long way before the capital will see the kind of growth achieved in Dubai.

''Abu Dhabi is a more limited market. They don't have clear land rules as yet,'' he says.

Here's an excerpt of the interview with Philliskirk.

- Do you believe the mortgage cap has helped cool off Dubai's realty sector?

Yes and it is effecting one segment of property buyers — the end users. We have seen a softening in prices from seller expectations. The Central Bank needs to take care not to disenfranchise first-time and genuine buyers in the market, which the mortgage cap is currently doing.

- How is the mortgage sector in Abu Dhabi?

Abu Dhabi is a more limited market. It does not have clear land rules as yet as everything is being done by the Abu Dhabi Municipality. Some banks are not comfortable with this, as their legal rights are not as mature as they are for banks in Dubai.

Having said that, we are still able to source mortgages for certain properties in Abu Dhabi, but that rate is very limited.

- Do you think lenders in Abu Dhabi are, therefore, less protected?

Indeed, yes! Lenders are definitely less protected in terms of a legal recourse. They do have some recourse levels, but it is not as well as in Dubai.

- How many people have taken mortgages and how many are cash buyers in Dubai?

Going by the monthly businesses closed by all the banks in Dubai, around Dh1 billion worth of mortgages is being closed every month. According to numbers provided by the Real Estate Regulatory Authority, it's a 60:40 ratio with cash buyers being a larger component of the buyers' market. Of the mortgage takers, 99 per cent are end users.

There are investors in Dubai, but they are not those intending to flip property. Instead, these are more serious investors looking to rent out their property long term, which again should not be discouraged as that is a positive thing for the market. It is important to avoid the property market from overheating, but it is also important to keep buyers interested in the market.

- Which are the hottest locations in Dubai to buy property?

It's across the board. However, large villa communities are seeing a slowdown, purely because of the mortgage caps and the high villa pricing. Turnover of villas has come down. On the other hand, small-sized villas and apartments are going strong. Talking specifically about areas, Dubai Marina, Downtown Dubai and Palm Jumeirah are some evergreen areas. Everything boils down to where people live and work.

- What is the current mortgage rate? Has it varied in the past two years?

Mortgage rates are hovering between 3.99 per cent and 4.25 per cent. The 3.99 per cent rate has been around in the market for two to three years. However, it is getting competitive and banks are continuously lowering their rates. We are seeing instances of rates going for even 3.5 per cent.

- How is the mortgage broker market looking?

It is a small industry, but it is becoming more prevalent because the consumer is getting more and more educated. People are more intuitive of what they want and they are seeking independent advice. Therefore, the broker is becoming integral when deciding to take up a mortgage.

- What is the difference between an equity release mortgage application and a standard application?

There is hardly any difference. An equity release application is no different from a standard application in terms of the structure of a loan against a property.

- Talk about the typical services of a mortgage brokerage firm such as yours.

Established in 2006, Mortgage International (MI) has partnered with all leading mortgage providers in the UAE and overseas to offer its services. MI has a team of consultants who are experts at finding exactly the right mortgage to suit one's requirements.

The mortgage broker tailors its products to suit individual needs and even manages the whole process with the lender right up to completion. MI also acts as a mortgage adviser on how to raise capital on a property that can be used for home improvements or to consolidate other debts.

Get tips for Property Buyers looking for a new house

Source: Anjana Kumar, Special to Property Weekly


For Rent


View more properties

For Sale


View more properties