Thursday, January 24, 2013

Buyers rush to buy homes to overcome new mortgage curb rules

Despite the speculation over the forthcoming amendments in mortgage rules, nationals and expats in Dubai are said to be rushing to purchase homes in the UAE property market.

A Dubai Municipality official, when speaking to the media, said that there has been a rise in sales since start of this year. Transactions worth Dh.490mn have been recorded as of 21st January 2013, in comparison to just Dh.200mn for the same day in 2012, marking a growth of 160 percent.

The Chief Economist and analyst at CNBC Arabia, Dr. Amer-Noman Ashour, said that Central Bank has clarified that banks should not expect any leeway with new regulations.

The 20 main bankers, during a recent meeting of Emirates Banks Association, had reported to the Central Bank that if new ratios were applied, only 2 to 3 percent of their clients will benefit from this, while 98 percent of the clients will not be able to pay the proposed down payment.

The loan to value ratios proposed by Central Bank are 70 percent for nationals and 50 percent for expatriates respectively. This implies that expats would be able to get a mortgage for 50 percent of the value of the property, while nationals could get a mortgage for 70 percent.

The new loan ratios are likely to be finalized by the Central Bank in six to nine months time.

Banks also discussed about funding of the second property and any subsequent property purchases.

Dr. Ashour pointed out that a ratio of 65 percent for nationals and 60 percent for expatriates for second and subsequent properties, provided they are already constructed, has been proposed.

Another suggestion submitted to the Central Bank was to take a decision considering the salary factor, rather than a decision based on Emirati or expatriate factor, and also to take other aspects into account such as nature of residence, credit and resident’s history, and other factors.

Dr. Ashour further said that there will be no off-plan selling or purchases at all, as per the new mortgage system. The unit that will be mortgaged and financed should have completed at least 60 percent construction, in order to be qualified for any banking finances.

The Regional Director and Head of Abu Dhabi office, David Dudley, said that the recovery of Abu Dhabi real estate market is to a large extent linked to the government investing in infrastructure, economic development, social development projects that general GDP growth, employment growth and provide better income, thereby driving demand for real estate and further improving Abu Dhabi’s urban offering.

The recovery of Abu Dhabi real estate markets will be directly linked to these projects generating new jobs and employment growth, and more such announcements are expected in 2013. The Abu Dhabi market cycle is at a time lag to Dubai, so the recent signs of recovery in Dubai, are certainly encouraging news for Abu Dhabi, he said.

1 comment:

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