UAE's banking industry are still trying to get a handle on their mortgage operations - latest data suggest that home financing transactions at the end of the first quarter are down to levels that were there during March 2013. And this is quite removed from the peak activity recorded during the first three months of 2014, according to Cavendish Maxwell, the consultancy, in the launch issue of its 'Property Monitor' report released.
Just as telling has been the drop in mortgage financing - 'Around the peak (during Q1-2014) we witnessed a spike in the level of refinanced mortgages
following a drive from local banks with new products targeting this segment', the report adds.
The subdued mortgage activity has been brought on by multiple factors, such as the high loan-to-value (a maximum of 50 per cent) set for off-plan launches, the general softness in buying activity experienced since the second-half of 2014, and banks' continued reluctance to go full out with their home financing offers. An option to set this right could be for the UAE 'Central Bank change LTVs to simulate the market in run up to the Expo (2020)', according to the Cavendish Maxwell report.
It is a step that Damac Properties has taken through an association with Abu Dhabi Commercial Bank, wherein buyers at its Akoya project will have their mortgage processing fees waived.
Other developers are spreading out the payment schedules, with the Safeer Tower 2 in Business Bay - launching on April 19 - requiring 10 per cent on booking, 10 per cent after 60 days, 20 per cent on handover (June 2016), and 60 per cent payable over three years post the handover.
But, at the broader level, access to mortgage remains a tight proposition - "For off-plan, the resistance (on the part of banks) is much higher at this stage and only (projects) of a handful of blue-ribbon developers are exempt," said Sameer Lakhani, CEO of Global Capital Partners. "This will change, but for now banks are predominantly interested in offering mortgages for ready units.
"It's evident from Dubai Land Department data of recent months the share of mortgages has moved beyond the traditional 15-20 per cent of overall transactions. In the villa space, it's now in excess of 50 per cent of all transactions and moving higher.
"This is all evidence of a maturing market - with more stable buyer profiles banks will take increasing comfort in taking up mortgaged assets. This sets the stage for banks to securitise and list them at some point." For the moment, though, potential property buyers would wish banks would just make it a lot more easier for them to sign on the dotted line.
With Sharjah easing property ownership regulations, developers are exploring the possibility of creating new and substantial residential stock in the mid-market.
"The first apartments available on a 100-year leasehold basis for all nationalities were announced in February at the Al Rayyan mixed-use development located in the Al Nahda area, close to the Dubai border," says an Asteco report on trends in the northern emirates' realty market in the first three months. The project, due for completion in the second quarter of 2016, includes 504 apartments, an office high-rise and a mall. A two-bedroom apartment was launched at around the Dh1 million.
According to the report, "Since the introduction of Sharjah's ownership law (which offers rights to expatriates as well), there has been healthy level of interest. However, the price point has proven very sensitive and the critical factor in whether transactions are completed or not."
For instance, at Tilal City - which offered plots for development in the fourth quarter of 2014 - "attracted considerable interest from both developers and end-users seeking to build their own villas despite being located relatively far inland," the report adds. "Villa plots have nearly sold out as prices started from as low as Dh30 per square foot." (Elsewhere in the northern emirates, the villas at the Mina Al Arab and Al Hamra developments in Ras Al Khaimah remain popular with expatriate buyers.) In the rental market, there is a marked demand for apartments in Ras Al Khaimah and Fujairah, helped on by "local economic activity from the ports and free zones, which has led to a constant development of new properties", especially for properties deemed affordable, Asteco’s report says." In comparison, Sharjah and Ajman have seen a reduction in demand as rental rates in Dubai have stabilised."
"Lease transactions slowed due to the decrease in the number of tenant migrations from Dubai."
In Sharjah, the popular rental areas such as Corniche, Al Nahda, Majaz and Abu Shagara continue to enjoy high occupancy levels, and more so in the better quality buildings.
In Fujairah, meanwhile, new apartments in the Shariya area are "proving popular", as well as “representing an improvement on existing supply".
However, the most upscale development in Fujairah - Al Jaber Towers - has a "low vacancy rate", the report adds.
Rising US dollar combined with world class infrastructure and high quality of life are strengthening real estate market in Dubai which is competing with other global cities such as Paris and London, according to a report.
Real estate consultancy Knight Frank in the report said that $1 million could buy 146 sq m of prime property in Dubai, whereas the same area would cost $3.5 million in Paris and $5.8 million in London. The strong dollar is impacting the volumes of real estate transactions from countries with sinking currencies against $which demonstrates the global attraction to the Emirate's property sector, especially from European, American, Russian and Asian investors.
International investors whose currencies are sliding are waiting until their currency gain momentum against the USD, before purchasing residential units as the strong $makes Dubai prices look steep. Many studies of Dubai realty market have underlined the importance of taking speculative investors out of the market for a healthier and sound property market.
The report says that the new development would lead to a market driven less by liquidity and more by supply and demand fundamentals. Regional and international investors are the key drivers of the UAE real estate industry, aided by the maturity of the market, and all this will contribute to further growth of the sector.
The strong dollar is cooling the market and weeding out short-term investors. Rental yields in Dubai are still one of the most lucrative worldwide as well as ROI on buying, which means that the realty market is very robust and on the way to becoming end user driven.
The New Year has started with increased uncertainty facing the Dubai real estate sector. Dubai's real estate sector ended the year on a quiet note as nearly all segments of the market witnessing stable rents and prices during Q4 2014. The residential and hospitality sectors of the market have experienced strong growth over the past 2 years, but the steam appears to have run out from this bull run, with both of these sectors now poised at the top of their cycles.
The major dampening factor over recent months has been concerns about the negative impact of lower oil prices on the Dubai economy and therefore the city's real estate market. While cheaper oil prices are likely to prove a positive for the global economy, they will clearly reduce government revenues in the UAE. However, Dubai's success at diversifying its economy and the continued growth of non-oil sectors, makes it less vulnerable to lower oil revenues than other GCC oil exporters.
There are two related major macro economic factors that have moved against the UAE economy over the past 6 months, the dramatic decline in oil prices and the significant escalation of the dollar against most other currencies (of which the decline in the Rubel has been the most spectacular). These factors have resulted in most forecasters revising downwards their expectations for the UAE economy in 2015. For instance, HSBC have reduced their forecast of real GDP growth for 2015 from 4.8% in October to just 3.1%.
The overall macroeconomic environment for 2015 remains relatively comfortable. In some ways this cooling of sentiment is a positive, in that it has affectively reduced the pressure on asset prices that was emerging in 2013 and the first half of 2014. The talk of an asset price bubble that dominated discussion of the Dubai residential market up to mid 2014 has now been replaced by much more sombre sentiment. There is no doubt that the bubble has deflated and the leading question now being asked is 'what next', JLL's view is that the Dubai residential market will see some welcome stability in 2015, with average prices declining marginally (by up to 15% over the year).
One of the other major trends we expect to dominate the market in 2015 relates to sources of funding. Dubai saw its largest ever IPO in 2014, with the successful launch of Dubai Malls. We have already seen another significant IPO this year (with Damac listing on the local Dubai market), and we expect to see further public equity raisings over the rest of the year. While debt levels have declined in recent years as major real estate developers have been able to refinance loans on more attractive terms, the level of debt remains significant. An indication of the strength of the UAE market now in comparison to the previous cycle is that the recent announcement that Dubai World has filed for article 57 (bankruptcy protection) to restructure its $14.6bn debt has been largely taken in the markets stride and has certainly not resulted in the same negative sentiment as in 2009 when the same government-owned conglomerate, which was at the heart of the emirate's financial crisis. Specific Dubai World subsidiaries covered by the bankruptcy provisions are Dubai World Group Finance, Istithmar and Port & Free Zone World.
Other trends that we expect to dominate discussion in the Dubai real estate market in 2015 include a significant but not excessive level of new supply; continued improvements in the legislative framework; the return of building cost inflation and an increased emphasis on public transport access and car parking. The increased level of traffic and the disappearance of 'sand parking lots' have combined to highlight the deficiency of parking in many existing projects. As paid parking becomes more commonplace, we would not be surprised if car parks joined education and health care as emerging real estate asset classes in 2015.
In conclusion, while sentiment towards Dubai real estate has certainly softened over the past 6 months, the market looks very different from the previous peak (in 2007/2008). The rate of price and rental growth in the residential, retail and hotel sectors over the past 2 years has been unsustainable. 2015 promises to be a more subdued year (with minor corrections in prices in some sectors), but this stability may be just the thing that Dubai needs in the long term.
Certain locations in the city including International City and The Greens offer cheaper monthly mortgages, finds research.
New research has found that it is cheaper to buy properties in certain areas of Dubai as compared to renting them.
Consulting firms say that analysis of a representative range of properties worth Dhs1.575 million or less in freehold locations across the city found that in some cases, monthly mortgages were cheaper than rents.
A 740 sqft one-bedroom apartment in International City demands an average monthly rent of Dhs4,167, while a monthly mortgage on a 25-year loan (with a 4.25 per cent interest rate) would roughly amount to Dhs2,800, the study found.
Mortgages were also found to be lower than rents in Discovery Garden, JLT and Motor City, among others.
Analysis reveals that many tenants may now be able to purchase a property similar to the one they are renting – but for a lower monthly cost. This appears to be particularly the case for lower cost starter type home.
However, home ownership comes with added responsibilities, additional costs and less flexibility and also that interested buyers will require significant savings to make the switch. With a maximum 75 per cent home loan LTV, a typical Dhs1.5 million expat purchaser will need Dhs375,000 in deposit payments, Dhs60,000 in Dubai Land Department registration fees and Dhs30,000 in real estate agent fees – this is before they pay for a surveyor, discharge any mortgage admin or legal fees, or buy furniture.
Should they choose to buy off-plan, then required savings will increase even more due to lower LTV rules for such properties.
Dubai's real estate industry has rebounded strongly from its slump in 2009, with values close to 2008 peak levels in certain areas. However, experts say sales prices have stabilised since mid-2014. Should you Buy or just Rent a Property in Dubai? Click here to use this handy tool to find out now!
Top Gun was playing in the cinemas, Madonna was in the pop charts with Papa Don't Preach and fashion was all about big perms and even bigger shoulder pads. The year was 1986 and the big news was all about the economy where a collapse in oil prices eventually led to a consumer spending boom in the West. Now, 29 years later, with the price of oil slumping 50 per cent in the past six months, the most since the 2008 financial crisis, experts are predicting a similar oil-fuelled property boom in non-oil producing countries – but a relative slowdown here.
Analysts say the oil slump is likely to hit house prices in Dubai, which had been already weakening due to the imposition of mortgage caps and a hike in property transaction fees. According to JLL, villa prices in Dubai fell 1 per cent during the final three months of 2014 while apartment sales remained flat. Rents, too, for apartments and villas remained static during the final quarter of the year.
The impact of the slump in global oil prices is likely to have a further impact on the real estate market in Dubai, largely through sentiment rather than through any actual decline in government spending. In Dubai a lot of buyers traditionally buy real estate using money that has come from oil funded economies such as the UAE, Saudi Arabia, Iran and Russia. So unlike in the West, the fact that oil prices have fallen and could perhaps provide consumers here with a little more disposable income is likely to have much less of an impact than everything else and we expect the overall effect on the housing market to be negative.
"The lower oil price will benefit the economies of non-oil producing countries such as India which, given that Indian nationals are big investors in Dubai real estate, may lead to higher levels of investment, and will be reflected in greater levels of tourism from these countries.
Along with other economists he predicts that, if it is sustained, the global fall in oil prices could well fuel another property boom in the US, the United Kingdom, Europe and China and Japan. The economic consequences of falling oil prices are unequivocally good, for the economy and for real estate fundamentals of western countries.
The majority of the boost to growth would come through stronger consumption but companies would also benefit from lower input costs. With a lag of 18 months or so we would expect to see higher rents than previously forecast across the board and particularly in retail. The residential sector will also receive a boost, as households gain the ability to service slightly higher mortgages. In December, IMF economists predicted that if the fall in oil prices persists, then global economic activity this year could be boosted by up to 0.7 per cent in 2015 and up to 0.6 per cent next year with most growth predicted for the West as well as non-oil producing developing nations such as China and India.
Billions of dirhams were wiped off the value of some of the UAE's largest companies on December 11, 2014 after the country's stock markets each suffered their worst day of trading in more than five years. Investors' fear over the falling price of oil intensified after Opec lowered its forecasts for world crude demand for the coming year, sparking a mass sell-off of shares by small and large investors.
The Dubai Financial Market benchmark was the world's worst-performing, plumetting 7.4 per cent to 3,594.95. It was the bourse's worst day of trading since October 2008, recalling the darkest days of the emirate's real estate driven crash.
The Abu Dhabi Securities Exchange General Index fared only marginally better, shedding 4.7 per cent of its value in its sharpest one-day fall since November 2009, closing at 4,368.31.
While it was common for investors to sell shares in a falling market to buy them back at a lower price, the few investors who were re-buying were doing so at far smaller volumes.
The past three weeks have erased the majority of the bourses' gains during the past year, with both markets in serious danger of ending the year in the red after promising gains earlier in the year. More than Dh35bn has been wiped off the value of Dubai shares this week.
Dubai's headline index, which was up by 59.5 per cent on the year in early May, is now just 6.6 per cent higher than at the start of the year. The ADX General Index is now up just 1.2 per cent since the start of the year, having been up as much as 22.4 per cent in May.
It was another torrid day for Dubai Parks and Resorts, the government-owned theme parks developer, which had the misfortune to float on the exchange on Wednesday, when the market also experienced a sell off. The company's shares fell by 7.7 per cent to close at 83 fils after their second day of trading, down 17 per cent since their debut.
Shares on the Nasdaq Dubai were also hit , with the ports operator DP World dropping 5.66 per cent. All of the GCC's headline share indexes finished in the red. Qatar Exchange finished down 4.3 per cent and Oman's MSM 30 ended down 4.1 per cent. The Kuwait Stock Exchange Index was down 1.5 per cent. Bahrain's BB All Share Index and Saudi Arabia's Tadawul All Shares Index escaped relatively unscathed, ending down 0.9 per cent and 0.2 per cent, respectively.
Home prices in Dubai stayed flat in the third quarter from the previous period as the mortgage cap introduced late last year continued to check the volume of property transactions, according to Colliers International. In the third quarter, property transactions were 6 per cent lower than in the previous quarter, data from the real estate services company showed.
As per the new rule which took effect in December last year, the loan to value ratio for buyers was set at 75 per cent for expatriates and 80 per cent for UAE nationals for property below Dh5 million. And for properties above Dh5m, the limit was dropped to 65 per cent and 70 per cent, respectively. Consequently, the Dubai Land Department too increased transfer fees.
Compared to the second quarter, there was slight decrease in apartment prices by 1 per cent last quarter to Dh1,567 per square feet from Dh1,584 square feet. Villa prices increased marginally during the same period to Dh1,480 per square feet from Dh1,474 per square feet. Townhouse prices increased by 2 per cent to Dh1,299 per square feet to Dh1,269 per square feet.
According to the second-quarter report from Colliers, apartment and townhouse values had increased 5 per cent from the first quarter of the year, while villa prices jumped 12 per cent in the same period. Meanwhile, Colliers said in its latest report that on a year-on-year basis, the prices of apartments, villas and townhouses saw an increase of 14 per cent in the third quarter.
The jump in prices year-on-year were attributed to a strong GDP coupled with government spending on infrastructure, tourism and hospitality. Among the popular neighbourhoods were Dubai Marina followed by Business Bay, Jumeirah Lake Towers, Downtown Dubai and Motor City. The majority of the transactions were for apartments followed by villas. Price of villas in The Palm Jumeirah saw the highest increase year on year of 38 per cent in the third quarter. Apartment prices in Jumeirah Lakes Towers and Motor City recorded the second highest growth rates of 30 per cent year-on-year. Meanwhile, rising rents in the second half of last year and first quarter of this year led many tenants to relocate to more affordable locations such as Jumeirah Village, Dubai Sports City, Remraam and Discovery Gardens. Rents in Motor City, for example, rose 30 per cent year-on-year. More residential units were expected to come in the current quarter, raising the number of units by 3 per cent from 431,300 at the end of last year. Of these, 44 per cent were expected to be freehold units. Developers, however, have not slowed down. Cityscape Global in September in Dubai witnessed the launch of 27 projects from developers such as Meraas, Nakheel, Dubai Holding, Union Properties, Damac and Meydan Group worth billions of dirhams. The new Indian government's budget proposal in the summer on capital gains tax on overseas investments is expected to pare the appetite of Indian investors in Dubai's real estate market. Indian buyers were involved in 4,400 transactions worth Dh10.5 billion in the first half of the year.
The falling rouble also means Russian buyers are finding it more expensive to buy in Dubai. The top five foreign investors by nationality during the first half were Indians, British, Pakistani, Iranian and Canadians, according to Dubai Land Department.
Dubai property prices have increased this year compared to 2013, but often property sellers are not aware of the current market valuation of their properties. They simply rely on real estate agents to price tag their units.
"There is no official sales price index for investors and so I generally leave it to my broker to decide the price," RS Shah, a British citizen, who has been buying properties in Dubai, told Emirates 24|7.
"Sometime, we know the broker has inflated the price, as they assure you to get a higher price. When that is not possible, they lower the prices. This in fact wastes a lot of time in finalizing a deal," he adds.
However, Mashreq, a Dubai-based bank, has now launched a property price index, which instantaneously gives you an indicate market valuation for your property. The index may, in fact, give you a heads up on the expected pricing for your listing.
According to the Mashreq price index, a 102 square metre apartment in Burj Khalifa in Downtown Dubai will currently fetch Dh4.1 million. Online listings put the price in the range of between Dh4.5 million and Dh5 million.
Similarly, a 100 square metre apartment in Jumeirah Lakes Towers is valued at Dh1.1 million. Online listings put the prices between Dh1.5 million and Dh1.8 million. Mashreq does clarify that the current market valuation is an "indicative market valuation of the property", which is based on its property price indexing.
"It is a fair estimate and does not take into consideration any actual details of the unit such as age, construction quality, floor rise, views, etc. To arrive at an exact evaluation you can consult a registered valuation agency or any other competent authority," the bank says.
TECOM Investments has signed anagreement with UAE's leading financial institution, Mashreq to enable the Bank to offer home loans for the new freehold villa development Villa Lantana. Through this agreement, off plan purchase for the development will become more accessible to UAE residents, either as an astute investmentor asa potential family home. The new Villa Lantana development, which is conveniently located in Dubai's growth corridor of Al Barsha South just minutes away from Mall of the Emirates, is due for completion by the end of 2015.
As a result of the collaboration, Mashreq aims to provide attractive and flexible home loans solutions to off-plan buyers, as well as those who have already purchased and are looking for finance to assist with agreed payment schedules on their new property. The agreement was signed by Badr Al Gargawi, Chief Executive Officer, Development & Planning Division, TECOM Investments , and Farhad Irani, Senior Vice President and Head of Retail Banking Group, Mashreq .
Benefits available under the collaboration include high loan amounts of up to AED 15 million; loan-to-value ratio of up to 50 per cent for offplan properties; loan tenure up to 25 years; low income eligibility starting from AED 15,000 per month, and finance for salaried and self-employed UAE residents at attractive interest rates.
The contemporary villas, set in a well-planned, beautifully landscaped family neighbourhood, offer interested buyers the choice of 17 different villa designs, 11 floor plans and a range of 3, 4 and 5 bedroom detached and semi-attached family homes. Villas span in square footage from 2453 square foot (Built Up Area - BUA) up to 6082 square foot (BUA). Catering to all family needs,the development's close proximity to Dubai's main arterial roads allows for fast and easy access to the city's primary business areas, retail and entertainment hubs, with a number of leading schools having recently opened in the near vicinity.
Six months after the IMF warned of an "unsustainable" surge in prices, an official from the international body has said that Dubai's authorities have done enough to control the emirates rising property.
IMF has said it sees no need for any action to be taken to avert a potential housing bubble, according to Harald Finger, who led a recent IMF delegation to the UAE. House prices soared by 35 percent last year, more than any other market in the world, which saw the country's central bank move to curb mortgage lending and Dubai's government to double the transaction tax. "The measures that have been put in place have helped," Mr Finger said. "At this particular moment in time, we would not recommend immediate introduction of any further measures."
The IMF official also praised Dubai's authorities for carrying out large projects at a "much more gradual and measured pace".
Dubai's housing market has cooled off this year, a sign of progress in efforts to avoid a repeat of the economy-busting bubble that burst in 2008. The slowdown partly reflects caution on the part of buyers, who have balked at the sharp price rises.
But government regulations aimed at cooling the market also have tempered sentiment, local property brokers say.
The intervention in Dubai mirrors policy moves by governments around the world to quell potential asset bubbles. Regulators and other government officials are using lessons learned from the financial crisis to tailor new tools aimed at containing problems before they inflate beyond control. Dubai has joined Singapore and Hong Kong in trying to control home prices with tighter mortgage-lending criteria and by increasing transaction taxes.
As prices rose last year, concern within the government increased because inflation, salaries and rents weren't keeping pace. The pipeline of new homes in Dubai is massive. Increasingly confident developers have moved forward with stalled projects, as well as launching new schemes. The current construction pipeline could release 55,000 new units by 2017. Around 19,000 are expected to be finished in 2015, the data show.
Another reason prices have steadied is that average Dubai house prices, although still well below the 2008 peak, are expensive. This is quickly making affordability an issue for residents and international companies looking to house employees in the region's dominant business hub.
Inflation data released on Tuesday revealed prices are rising at their fastest level since May 2009.
Dubai inflation jumped to 4.2 per cent last month, up from August's figure of 3.5 per cent. Countrywide inflation rose to 2.9 per cent, while Abu Dhabi inflation hit 3.7 per cent.
Housing costs accounted for the majority of the price rises, while a small increase in food prices also contributed. Some 43.7 per cent of household income is spent on housing in Dubai, making it the single biggest item of individual expenditures.
Economists have raised their expectations of UAE inflation in line with recent figures.
Paul Gamble, the head of sovereign ratings at Fitch, the ratings agency, said that he expected Dubai inflation to hit 5 per cent within the next 12 months before falling in 2015.
Capital Economics expects UAE inflation will total 2.3 per cent this year, before hitting 3 per cent next year.
NBAD expects inflation to average 2.4 in 2014, rising to between 2.8 and 3 per cent in 2015.
These estimates are in line with a poll of economists by Reuters, who expect inflation of 2.5 per cent this year, and 3 per cent in 2015.
Once the UAE Credit Bureau is in effect, banks will have all the information they need about their clients in front of them and approvals for loans will take a fraction of the time they now take.
In addition, the organizations who are building an infrastructure to link up to the credit bureau will be in a far better position to drive more efficient delivery of product. It will also be a lot cheaper. The client will get a better limit and a better interest rate.
Al Etihad Credit Bureau, which is expected to be fully operational next year, intends to create a database of the credit history of all retail borrowers, enabling banks to build an accurate picture of a potential borrower's indebtedness, allowing them to assess his or her ability to honor the debt. At the moment banks cannot check the credit history of customers relating to other lenders.
Last month it said it had started issuing consumer credit reports to banks and financial institutions that have subscribed to access its credit reporting system and submitted historical credit data.
Experience in other countries shows credit bureau can help to stop individuals with a poor credit history from amassing further debt, while easing the flow of credit to those able to repay loans. Banks benefit by generally not having to build such large provisions, or money put aside to cover bad debts, against the risk of defaults.
Higher fees and the recently introduced mortgage cap are having an effect on the prime property market in Dubai with price growth weakening. After entering positive territory in the middle of 2011, annual residential price growth in Dubai's mainstream segment has been very strong indeed. However, after peaking at 35% at the end of 2013, the growth rate has now been slowing.
The deceleration in price growth can be attributed to a combination of higher transfer fees and the mortgage caps. The new rules have also impacted Dubai's luxury homes market to a much greater degree. Prices increased by just 6.3% year on year in the second quarter of 2014 compared with 24% in the mainstream property market.
Emirate sees stronger economic growth and more conservative spending
Dubai's economic growth could hit as high as 5.6 per cent this year if the global economy stays vibrant but the emirate's rebounding real estate sector faces a short-term price correction.
The IMF predicted in a recent report that Dubai's ability to finance its debts had improved because of stronger economic growth and more conservative spending, but warned that the emirate would still be vulnerable in a major downturn of the global economy.
In 2014-second quarter, residential sales prices and rents were still on the rise, but the rate of growth slowed dramatically for both sale prices and lease rates, leading to yield compression. Reports predict that 30,000 additional units are needed in Dubai through 2018 to maintain rent stability.
The average net yields for individual properties compressed to 5.6 per cent and 4.5 per cent for apartments and villas. Market transparency appears to be regressing and that could increase the risk profile. Since speculation pays a major role in this market the property sector will continue to display volatility. In the short term, this could lead to a price correction, following a two-year period of exuberant investor sentiment.
Emirate ranked 13th for all regions as luxury price growth beats global average
Dubai has got the status of the best performing luxury real estate market in the Middle East. Dubai's 6.3 per cent annual price growth of luxury homes is also slightly better than the global average recorded during the first half of the year.
Dubai was ranked the 13th best performing real estate market. The mortgage cap and doubling of transfer fees at the end of 2013 in the Emirate influenced buyer activity more than forecast.
New research revealed 25 to 35 per cent of purchases are mortgage financed in the Emirate, more than previously thought. However, with new supply at the prime level looking limited over the next 18 months, prices in Dubai are expected to strengthen in the remainder of 2014.
If you are applying for your first Home Loan in the UAE, there will be multiple stages of approval you would have to go through before securing a mortgage. However, if you are an existing Mortgage holder here, you are among the lucky few. Banks in the UAE are gung-ho about the prospect of refinance and are going to great lengths to attract prospective clients from its competitor banks. This is an ideal opportunity for existing Mortgage holders to shop around for the cheapest deals and reduce their overall cost of mortgage.
As per the regulations of the UAE Central Bank, expatriates purchasing an off-plan property are required to make a down payment of 50% of the property value. With the down payment % being so high, going ahead with the purchase and subsequently securing a mortgage has become difficult and expensive. This is where a Lease-to-Own scheme will come as a breather. Technically structured as an 'Option' contract, this scheme will allow the tenant to lease the property in the short-term and decide whether he wishes to purchase it eventually. The seller will give the tenant the option to purchase the property at a certain 'fixed price' and within a certain 'specified period of time'. In return, the tenant will pay the seller an 'Option fee' for this flexibility.
As per a recent research, Home Loan rates offered by most banks in the UAE today are lower than the rates offered 1-2 years back. The Mortgage rates across Banks are mostly in the range of 3.5-5% p.a.with special promotions and offers on Processing fess and Early Settlement fees from time to time.
Home loan providers and Banks in the UAE pay special emphasis to mortgage applications of employees belonging to any one of these four professions – Lawyer, Diplomat, employees of Real Estate firms and employees of Construction firms. It is often seen that these applicants are expected to furnish more documents as compared to their salaried counterparts belonging to the Non High-Risk sector and their home loan processing requires a greater number of approvals.
The property bubble that was seen building up post Dubai winning the bid to host the Expo 2020 seems to be settling down. Buyers are unwilling to pay hefty premiums that were being quoted in the markets a couple of months back. To add to this, higher mortgage caps and transaction fees have all contributed towards stabilizing the Real Estate market in Dubai. There is further speculation that investors of off-plan properties should get ready to face some additional charges in the coming months.
Last month we had reported that Mashreq bank announced its Home Equity Release solution. While this is not a new concept in the mortgage world globally, Home Equity Mortgages seem to be truly gaining in popularity in the UAE. It is considered to be particularly useful for a property holder in the UAE who is looking for some extra funds. Most of the banks in the UAE have started offering this product.
The exposure of banks to the booming real estate sector in the UAE has remained stable at high levels, and is likely to increase in coming years, global ratings agency Standard and Poor's said. "In the short-term, tighter lending caps should protect the asset quality of banks in a downturn, but not spare them entirely because of the weight of the property sector in the UAE economy," S&P credit analyst Mohamed Damak said at a media briefing.
The UAE's federal credit bureau formally begun their operations in the UAE following a Cabinet Resolution by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, in the month of May. Bankers expect new checks will curb bad lending and speed up loan approvals.
With property prices recovering substantially in the country, mortgage business is becoming active again. Emirates NBD is conservative in its mortgage lending policies. While significantly high cash transactions are expected to impact the property valuations in the market, the bank believes that the end user market is likely to remain sober and will be largely driven by demand and supply factors.
Mashreq announced the launch of its 'Home Equity Release' solution, which enables clients to use the additional value in their home to generate cash flows, which can be used for further investments. Home equity loans allow borrowers to use the equity in their home as collateral. This means that if a customer has a property which is fully paid up and not mortgaged, they can take advantage of the value in their home and cash out part of that value which can be further invested in real estate, the stock market or to finance a business venture.
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