70% of banks set AED20k salary limit for mortgages

Posted by: Kamran Saturday, 17 October 2009 6:59 PM[UAE]

What I realize about the banks here are that they are very late to the game. After Real estate prices are back up at least 40% from the trough, then you will see the banks say to themselves "hey it's our business to lend, in fact we make money that way". Their sophisticated risk managers will give them the green light, but guess what my friends you would have missed a 40% move in the market by then. I don't care what anyone thinks about what I'm saying. I just want to come back and say I told you so....

Posted by: Damodhar Ashok Friday, 16 October 2009 1:31 AM[UAE] - UAE

This is a period where all banks in UAE are assessing the market and customer reaction to the restricted lending. Although the property prices are very attractive, we still do not see enough first time buyers, buying their dream homes, due to the steep down payment to be put down on a property. As we are still seeing some amount of fluctuation in the property prices, and still some distress sales happening, the banks are a little sceptical on the stability of the property market. On the other hand we are able to see some luxury properties being bought for very low prices, and a lot of first time buyers getting more interested in buying their first homes in Dubai, which of course is a very good sign. As most of the banks are maintaining or building a good balance sheet for the year ending, they will not take aggressive measures as far as lending is concerned. In January when new budgets are drawn, all banks will become more aggressive in lending. Till then lets keep our fingures crossed. Damodhar Ashok

Posted by: gordon Thursday, 15 October 2009 1:07 PM[UAE]

This is actually a liquidity issue. In any credit induced recession it takes on average 7 quarters for the money to be freely available again. As there is a shortage of credit, then the banks will automatically ration the money to the lowest risk. It should begin to change dramatically at the end of 2010 It may be unfair, but that is the law of supply and demand. Gordon

Posted by: Anonymous Thursday, 15 October 2009 12:01 PM[UAE]

I agree with John. This strict policy is not helping anyone...not buyers who want in on the market and certainly not the developers who would like to sell their properties to end users instead of speculators. Let's think about how many studios and 1 bedrooms are available right now and will be available in the next 12 months. Many of these units would be available for less than AED 700,000. If someone puts down 30% (AED 210,000) they would have a mortgage amount of AED 490,000. Depending on the interest rate, payback period and other financial commitments of the buyer, I believe someone earning AED 15,000 could probably afford payments of AED 4,000 to AED 6,000. They are probably paying this much or more on rent so why not buy their own place and try to build up some equity? I just do not understand why the banks have gone from one extreme where they were giving money away to everyone to the opposite where qualifying for a mortgage loan is nearly impossible. I remember receiving phone calls last year from different banks begging me to take a mortgage from them. Those calls have stopped. Going to such an extreme does not make good business sense. The government should seriously get to work on the Amlak & Tamweel merger and stop dragging their feet. More finance options should help both developers and buyers.

Posted by: John Thursday, 15 October 2009 10:01 AM[UAE] - UAE

"80 percent were reluctant to consider loan applications in developments that are not complete." If this had been the case before would the bubble have exploded with such force