UAE mortgage cap plan to impact house prices - JLL

Red Snappa

Remember to be considered a mature property market, there has to be some reasonable balance between investor and end user owned properties. A 50% LTV mortgage rule applicable 91% of Dubai's population, will completely skew that balance.

Although, there is something to be said for equity release on existing property in a low interest zone elsewhere, perhaps.

However, as has always been the case, the state of real estate markets elsewhere will have a bearing on what happens in Dubai, and it is better to keep prices low or even drive them down in comparison to other mature markets, to maintain a value attraction.

I do however, like the Malaysian discipline of a 5% tax or even higher on an incrementally decreasing basis should the property be property be sold within 5 years, as an alternative to the 50% mortgage ceiling.

Akbar Kazmi

The 50% lending cap by CB to expat buyers should be seen in the context of int'l norms since it is one of the most stringent when compared to U.K., Europe, Far East, and many Gulf countries who have allowed expats to own freehold properties. Malaysia did the best thing when trying to control speculation. They continued to allow banks to lend 75% to expats for property, but they introduced a sales tax on the sale of property on a tiered basis. If a new buyer sold the property after 5 years of holding it, there was no sales tax on it. But if sold within a year the tax on the sale price was 5 pct, reducing annually to zero pct at the end of 5 years. This is a much more sensible way of controlling speculation than by imposing the new lending cap, which will disuade genuine investors, hurt the developers, the banks, and the economy. Will lead to oversupply, and falling prices, not good for banks either. I feel this approach should be considered and the lending cap maintained at 75%

GBF

Akbar is right on the money here. This is the exact policy to be adopted.

Ed B.

It is excellent news that UAE Central bank takes effective actions, that will see great future benefits for the UAE. This move will help to keep the housing market healthy and gain quality investments over speculation. I?m also a strong believer that the move will have no effect on rents; in fact there will be a higher number of properties in the rental market as much of the current properties that are build are developed under speculation market conditions.

I also wanted to make note, that UAE Central bank is right to keep a very strong tab on bankers. I believe there is enough evidence that bankers have it too often wrong, and that the banking culture still need a long way from being responsible citizens in world economics. There has to be a much better balance in objectives to serve the own business, customers and national economy. Unfortunately, the latter 2 are less priority today for bonus carrying bankers.

Horseman

Nonsense. It will completely skew the market where 95% of the population cannot afford to buy property in UAE. This will mean that investment companies and wealthy individuals will be able to exploit their economic power, creating a false market. This will only lead to market manipulation & rents WILL go up.

The lack of villa housing stock is a problem - families who are wanting to make the UAE their home for the forseeable future are limited in their options - these are the very people who could have afforded a mortgage under normal circumstances yet are being DRIVEN into renting.

By all means impose a sales tax, or profit tax and make it painful for those who seek to flip properties with high rates in the early years.

I have just paid over AED80,000 to the land registry department to list my modest villa. Can you not see what is going to happen to transaction volumes (oh, and jobs for the Emiratis who do the processing).

A proper legal framework is what is really needed!

Real estate expert

Hans is right, I still can't believe what I hear and read from people sitting on the fence. All reassuring statements from bankers and likes of JLL are only made to soften the blow and not sent the market into a panic. I work for one of the most active property valuation companies in Dubai (RICS) . I can confirm that reports going out on residential properties in Dubai's freehold areas are being valued at least 25% lower than before the 30-12-12.

Torpedo Ray

Errrr....yeah right!...in a matter of just over a week property values have not fallen by at least 25%...we will probably see a limited fall over time as the market digests the Central Bank missive but comments like yours, whilst lacking any substance, certainly do have a comedic value so I commend you for allowing me a fine chuckle this morning...

PS: back to fantasy land for you!

I dont buy it

This makes sense. I don't believe the statement of "there's 80% cash buyers so market will not be affected". I was about to buy a property and now I am putting my plans on hold for a few months. By the way, I wonder how long it will take for the market to stabilize?

Raed

@ Iqbal, better late than never. The central bank is worthy of respect and high regards for intervening and let us hope they stick to the mortgage cap and do not cower down to the avarice of the insatiable banks. If the rents increase, well lets just pack and shift to Sharjah and further to the northern Emirates but we cannot and must not allow the real estate brokers take advantage of this mortgage cap by squeezing every Fils from our savings, those days are long gone but not forgotten.....

Formerexpat

Raed, do you understand the role of a real estate broker? They aren't the ones setting te property prices.

As for moing to Sharjah, talk about cutting off your nose to spite your face!

BLT

What is worse, if the rule is not applied, speculators will make the prices go up and hence, rent will go up anyway

Luis

Only ritch people like you an buy cash, it's not about their religion.

SA1

Its not about Richness of money, but richness of heart....otherwise why else we see supposedly billionaires/millionaires but still in huge debt and defaults on bank loans.

There is no harm or shame in living within one's means. We don't want another sub-prime mortgage crisis here.

iqbal

The action of UAE Central Bank is akin to closing the stable door after the horse has bolted. It came about 4 years too late.

Ahmad Pervez

This is an excellent initiative by the Central Bank to curb the speculative activity and inflated prices witnessed in 2008.

Hans

There are, from the economical point of view, two sides of the coin. Reducing the Mortgage is leading automatically to a reduced demand for Properties. In addition to this as per the reports there were a big number of new developments announced end of 2013. Which is equal increased offer by reducing of demand. This will lead to again to reducing of prices in the market and a new downwards movement. Sorry but this are the economical facts and everything else is pure psychological nonsense.

A. Amir Mohd

This is a very good move. At least we muslims must try and lead as much as possible a loan free life. Its better to buy home when you have money in pocket and ensure that your life does not become hell when you cant pay bank installments. A move like this will help curb the disbalance game some investors play with.

Formerexpat

Why do you need the central bank rules for you to do ths? If you honestly believe what you have written, and can afford to buy a home for cash, then do it...regardless of CB lending limits.


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