Dubai on mortgage at the prevailing rates

Customers who have purchased property on mortgage in the UAE feel the industry has grown considerably in the five years since inception but still has a long way to go to meet international standards. Most of the respondents to a survey said a middle-income family cannot afford to buy a home in Dubai on mortgage at the prevailing rates. In a series of interviews with industry professionals and consumers, who have used mortgages to finance their homes, researchers from DSL Exhibitions – organisers of the Resale and Rental Property Show (R and R Show) in Dubai – asked respondents to answer a set of questions to gauge their opinions on the property finance industry. “We conducted this opinion survey to understand the issues that concern consumers so we could offer this snapshot to our exhibitors,” said Tessa Morris, the marketing director. Most of the respondents said that in terms of number of companies, the UAE presents a competitive scenario. Media reports have already estimated the size of the property mortgage market will reach Dh17.5 billion this year, with the home finance sector itself registering a 64 per cent growth from Dh7bn last year to Dh11.5bn this year. Bassam Ghani, who financed his villa in the Springs, said: “I bought my villa directly from Emaar and since they recommended Amlak I chose them. But I did shop around since almost all banks now offer property finance products.” Mohana Rao, the International Business Development Director at Ideal Management Essentials (IME), said: “In the short term, all banks will offer property finance services – however, in the long run, the financial institutions will begin to design tailor-made products to better suit their customers’ requirements – such as payment terms, tenures, minimum salary requirement, down payments, charges and so on.” A majority of respondents also agreed that in the short term property finance companies will jostle for market share but over the longer term, competition will result in providers creating more competitively priced mortgage products and keeping interest rates as low as possible, thereby creating a stable market. All the respondents agreed that with prices of property where they are right now, a middle-income family cannot afford to get a mortgage in Dubai at the moment. Adilane Sakane, who lives in a tower in Dubai Marina, said: “A basic two-bedroom apartment costs Dh2 million. Over 25 years, the minimum reducing interest mortgage will cost at least another Dh4m. That is Dh6m over 25 years. Tell me, which middleincome person can afford to pay Dh20,000 per month?” In the United Kingdom, average mortgage repayments, as a percentage of average household income, have remained between 15 and 20 per cent for the past 20 years, never exceeding 25 per cent. “If the same conditions are replicated in Dubai, most people will prefer to buy property on mortgage than rent a home,” said one respondent. Nearly 70 per cent agreed that the industry has still to mature by offering both innovation and flexibility. Mature mortgage products such as interest-only mortgages and hybrid adjustable rate mortgages that allow purchase of insurance against interest rate risk are still unavailable in the UAE, although Tamweel’s “Yusr” and HSBC’s “Flexi Home Loan” were cited by some respondents as indicators that the market is moving towards sophistication. Owen Belman, the head of consumer banking at Standard Chartered Bank, said: “Standard Chartered Home Loans are carefully designed to offer customers the financial support they need with the maximum convenience and choice. That is why we have partnered with leading real estate developers to provide our customers with a wider range of property options to choose from.” However, lack of knowledge, both about the intricacies involved in evaluating a mortgage plan as well as comparing apples to apples was stated as a reason why companies are not being “pushed” to introduce such products. Source : emiratestoday