Mortgage curbs to hit first time buyers

BUYERS HIT: Home buyers could be forced from the UAE property market. (Getty Images)

First time buyers could be forced out of the UAE property market after mortgage lenders reined in loans, analysts said on Thursday.

But the move could also curb speculators hoping to make a quick profit from “flipping” properties on.

“It is going to affect people that are trying to get a foot on the ladder,” Jean Luc Desbois, managing director of Dubai-based mortgage consultancy firm Home Matters, told Arabian Business.

“Dubai is attracting a number of younger people and with the rents continuing to increase, the opportunities for them to buy is going to be reduced because the amount of deposit they [now] need to find is higher,” he said.

Tamweel and Amlak, the biggest Islamic mortgage lenders in the UAE, have both dropped their loan to value ratio in the last two weeks.

Tamweel has lowered the maximum amount it is willing to lend against the purchase price of a property from 90 to 75 percent while rival Amlak has dropped its loan to value ratio from 90 to 65 percent.

The deepening global credit crisis has forced governments to bail out banks as liquidity dries up.

Last week the US approved a $700 billion plan to prop up its financial institutions while the UK yesterday announced that its own banks would get an $87 billion lifeline.

Last month the UAE central bank pumped $13.6 billion into the UAE banking system in a bid to ease the impact of the liquidity crunch.

Lenders are lowering mortgage rates as credit tightens and home price growth slows.

In September HSBC Middle East lowered its loan to value ratio from 80 to 70 percent. Lloyds TSB, which currently lends a maximum of 80 percent against villas and 70 percent against apartments, has said it is reviewing its loan to value ratio in line with its international mortgage offerings.

Speculative buyers, blamed for driving up the cost of housing across the emirates, could also be put off investing into the real estate sector following the changes.

“It will reduce the number of speculative buyers and that would not be a bad thing. It would help ensure the real estate market remains fundamentally sound for the long term,” said Mohamed Jaber, an analyst for the GCC region at US bank Morgan Stanley.

“It may reduce the number of first time buyers, but on the other hand, at a time when there are concerns about the banks exposure to the real estate sector, it could signal to the markets that they are taking good precautions,” he said.

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