Dubai’s mortgage lenders are yet to turn generous

GNImage Credit: Sankha Kar/Gulf News Archives

Dubai: Dubai’s property market is yet to record a spike in mortgage lending from banks, ensuring that potential end users have limited options to pick up the home of their choice. Home financing disbursals through the first quarter, based on market feedback, was stable at best and remained so through April as well.

It is unfortunate since two of the other key fundamentals in the property market are showing signs of sustained improvement. For one, new off-plan launches have shot up quite significantly in the first four months. And, two, the rate of decline in values for ready and secondary market properties has slowed down considerably during the same period compared with the sort of free fall recorded last year.

“Cluttons’ valuation instructions for secured lending in the residential property market was subdued in January,” said Richard Paul, Head of Residential Valuations at the firm.

What further complicates the situation is that the offered rates on mortgages are averaging between 4-4.5 per cent, while there have also been advertised rates of 3.49 per cent. These are among the lowest in recent times, but those who are able to use it remains part of a still insignificant pool.

Even then, these rates are being tapped by home buyers who have the right sort of credit history with banks. Or their buying chances are limited to picking up studios or one-bedroom units in only such “affordable” locations as International City, IMPZ, certain clusters in Dubailand, and Dubai Silicon Oasis, according to a recent Cluttons report.

Anything further up the pricing spectrum remains cut off for the great majority of potential end users without the required cash of their own to put in. (These are based on the loan-to-value lending norms in place and the fact that a typical mortgage deal would be offered at three-four times the annual salary of the home owner.) For those home owners who can put in 50 per cent on their own, the “available purchase options would be boosted to Dh900,000 to Dh1.2 million, allowing access to one- and two-bedroom apartments in locations such as Downtown Dubai and Dubai Marina, or three-bedroom villas in areas such as Arabian Ranches or Nshama Town Square,” the Cluttons report adds. “However the number of buyers willing to commit to a 50 per cent loan-to-value ratio remains very limited.”

According to Paul, “But as more property owners wish to sell — slowly coming to terms with the realities of the market — and as we move through 2016, we are seeing a greater number of deals completed, albeit at competitive prices. Valuation instructions have been positive in March and April, which bodes well for the market at large.”

Source: Manoj Nair, Associate Editor, gulfnews.comGN


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