MORTGAGE
MORTGAGE MARKET SHOWS SIGNS OF RECOVERY
UAE lenders slash home loan rates to lure buyers back to property market
mortgage rates in the UAE at 9.5 percent. Today, the regional arm of Europe’s biggest bank is promoting home loans from as low as 5.49 percent on some properties. Rates at rival lender Barclays start from 5.35 percent, while local lender United Arab Bank offers introductory interest rates from 3.99 percent. Banks across the UAE are slashing mortgage rates as they edge back into the property market, amid signs house prices may be finding a floor after a two-year rollercoaster. Te easing of the interbank lending rate has helped bolster liquidity in the market, and banks are increasingly looking to find ways to grow their loan books. “Te rate cuts are a reflection of EIBOR rates coming down, which is good
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for the market,” said Sam Wani, general manager at mortgage broker Independent Finance. “Rates are moving down to the higher end of 4.5 percent or the lower ranks of five percent. Te gap is narrowing, as banks see mortgages as a fairly safe place to lend again.” Nearly 70 percent of banks withdrew from real estate financing during the crisis, estimates property consultants Cluttons. Now, 95 percent of those lenders have returned to the market. In part, this renewed interest may be driven by recent UAE Central Bank legislation that placed caps on personal loans, taking a bite out of some banks’ profits in that area. “Banks are increasingly telling us that they see mortgages as more
profitable than other loan products. By cutting their rates, they’re looking to book more significant volumes,” said Wani. But the decline in interest rates hasn’t necessarily translated into
improved lending. Banks, many of which remain overexposed to the real estate sector, are applying stringent conditions to new loan applicants. Lenders also require hefty downpayments on mortgages, typically a minimum of 20 percent of the purchase price.
t the peak of Dubai’s property bust in 2009, as credit dried up and speculators fled the market, HSBC Middle East was offering
“Banks are certainly more willing to lend, but only to the right people,”
said Matthew Green, head of research and consultancy, at CBRE. “Te rates being banded about, from 5 to 5.5 percent, you’re only going to be getting that if you’re a very attractive client. Most clients would likely see a rate more like 7.5 percent. Te capital requirements, the deposits needed [for a mortgage] are still high and a lot of people remain priced out of the market.” Banks, burned by the collapse of the UAE’s real estate bubble in 2008, are
likely to remain cautious on lending going forward, said Liz Martins, senior economist at HSBC Middle East. “For the last three years we have had super low base interest rates but these haven’t fed through to stronger lending, for mortgages or otherwise,” she said. “In 2012, we’ve started to see an improvement in credit extension in Saudi Arabia and Qatar, but still very little improvement in the UAE.” Property mortgage loans in the Gulf state totalled AED160.1bn in the nine months to September 2011, according to the latest Central Bank data, down from AED163.1bn at the end of 2010. Oil-rich Abu Dhabi registered AED39.1bn worth of mortgage sales last
year, the emirate’s municipality said in January, peaking in August when AED 9.82bn of home loans were registered in the city. Te municipality did not disclose the value of deals made in the year-earlier period, or the number of sales. In a bid to bridge the gap between buyer demand and financing,
developers have lobbied the UAE government to lean on banks to loosen credit lines. Sorouh, Abu Dhabi’s second-largest property developer, has also rolled out ‘rent-to-own’ offers in its own projects to attract buyers. Te company predicts more creatively priced schemes to become a fixture of the Abu Dhabi market as supply increases, and developers compete to offload homes. An estimated 28,000 units are due for completion in the capital this year, according to property consultancy Jones Lang LaSalle.
36 I CITYSCAPE I APRIL 2012
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