UAE said to limit expat mortgages to 50%

Geko

Simple theory. No one is homeless in Dubai and the person who love to have a home of his/her own should be strong enough to buy it with own cash not the bank.
In other words, whoever holding those additional reserve should not be able to damage the market at their own will. Secondly, CB possibly rights off the need for additional residential or commercial space at this stage and would like to restrict the movement, since current properties are already attached to some kind payment scheme that sounds stable.
Obviously, RE and Developers are no longer or to be considered the front force of this economy.

Red Snappa

I read recently that foreign expatriates make up 91 % of the UAE's population.

Therefore logically, they represent the vast majority of the property buying public, and reducing maximum loan-to-value lending to 50% to such a property dominant component of the population will reduce the real estate purchase pool dramatically.

Undoubtedly raising a 50% deposit will prove a daunting task for most genuine home buyers not just a few in what we are constantly told by consultancies/ advisories is a rising market, making the only solution a huge drop in house prices to offset a flight in demand.

Among the top property markets in 2013, I believe that a recent report said, given that this latest UAE CB intiative passes into law, I think not!!

Maybe the banks can lobby the CB as they did over the lending cap to state-linked entities, and get a stay of execution. However, it may be that by stepping back from that particular dictate, the CB has had to find another approach to control lending!

Mike

I work in real estate. Only one out of ten buyers is a cash buyer, the rest are finance between 70 to even 90 per cent LTV. This law will kill the market for sure and I don't really see how it will benefit the economy... There are other ways of discouraging speculators as Dave suggested in another post, cap the second purchase or apply penalties if the property gets sold before two years. As it is this measure penalizes end users big time!

Gautam Sippy

This 50% LTV will bring prices down and make it very difficult for UAE Resident Expatriate End Users to buy their first property. Existing Property Owners - while their Property Valuations is likely to take a bad hit, due to shortage of new stock to the market, the Rents they can earn from their properties will surely increase which is going to hurt the End Users who actually want to stay in the Properties...this will be bad news for many. Besides, the existing nearly completed stock which could be completed by Developers and Sold to End Users..if a 75% LTV Mortgage is available to End Users, will no longer be possible to complete and sold to End Users with just 50% LTV. This could brings us back to 2009/2010/2011 where a lot was at standstill. This 50% LTV should be for second mortgages and not for first mortgage. For first mortgage at least a 70% LTV could be a good level for all parties. This LTV resulting in low prices will help outside investors paying 100% Cash to own properties

dominic

Fairly naive and knee jerk reaction by the bankers in the central govt. A Free market and Common transparent law are key to growth -look at UAE pre and post freehold. They developed 30 years and just 5. A property correction is a small downside for such growth.
New law effectively bankrupts every uae developer (cant sell any new projects), most real-estate companies and cuts banking profits to the core (banks make money by lending) - just look at the stock markets reaction. So how does this help growth?
Id say this will be rethought quickly and more reasonable measures deployed. Usually central banks combat speculation with interest rates and insuring banks have a reasonable loan to savings ratio
Speculation actually also plays an important part - without the initial investors they would be no market - they pay their money and they take their chances
Expect rents to double as ppl cant buy & population decline in the long term as people live where they can buy a home

Dino

This is illogical and against the market economics of a healthy real estate sector. It is the end users who need mortgage and a ratio of around 75-80% is reasonable and adopted globally but something as low as 50% would just kill the market as genuine buyers rely on mortgage for their property needs. This will not curb speculation but further fuel it as it will lead to increase of speculators and absense of end users which is disastrous for the real estste market in the long run.

ALI

@telcoguy
i have been working with the people who are living in Dubai from last 30-35 years and they are planning to inviest in Dubai Real Estate so its not totally true that their average staying time in UAE is just to 4-5 years.

AAA

Why is this being considered anti end user? This is actually end user oriented. An individual is not an end user (1) If objective is to just save rental cost by taking a mortgage liability for 20/25 years (2) If objective is to buy more than one unit using mortgage (3) If your horizon of staying in this country is not more than 10 years. (Most expats can?t answer this anyways).

Speculators are investors with borrowed capital or have limited cash inflow. The risk they take is on the money which they don?t have. 100% cash buyers are taking 100% risk on their own capital. If you want to invest in UAE or want end user status, make 50% contribution rather than just 20%.

Considering the expat residence visa status of 2 years and zero restrictions on capital flows, UAE Central Bank has done the right thing by limiting mortgage LTV?s and thereby protecting the banking system. Impact on real estate sector is irrelevant as it impacts speculators and not the real end users or investors.

AAA

Seems like u were about 2 change ur nick name 2 Happily-Invested or Happily-Leveraged.

Wake up & see what CB is doing. It imposed caps on auto/personal loans & bank lending to government entities (most developers are govt owned). Credit Bureau coming soon too. Ur wish of bankruptcy laws is wishful thinking 4 someone living as expat & can leave UAE forever without paying off loans.

UAE is learning from debt crisis. It provided liquidity support to R/E entities & banks, guaranteed deposits, bailed out few entities & Dubai. Don?t forget the strain on Economy (banking sector losses), on Police (catching defaulters) & on Judiciary which had to deal with enormous dispute volumes.

Now if ur getting the big picture (if at all), also please note that UAE economy is not at all dependent on Real Estate to grow its economy.

But can?t argue with someone who wants some ?deregulation? to stimulate growth, greed & the unavoidable bubble which CB is exactly trying to avoid. That includes u 2

Happily-Uninvested

You clearly have very little understanding of how a market economy works!

By introducing such a high threshold for entry you will limit the transaction volume drastically, and by doing so the prices will stagnate making investments in the UAE property market even less attractive than they are today. Eventually this will lead to prices dropping (maybe even off a cliff?) making investments in UAE completely unprofitable, but even then nobody will be looking to invest (as they are quietly waiting for the market to bottom out).

So what would happen once this awful situation is reality? That's correct, the government will once again feel the need to deregulate and this will stimulate growth, greed and the unavoidable bubble...

If the objective is to protect the banking system then they should impose a credit rating system and bankruptcy laws.....

Buyer

Market killer!! 75% for flats, 85% for villas, everyone that has an existing mortgage is grandfathered in, no retroactive messing around with peoples existing mortgages on any unfinished properties or existing properties.

Gav

House price value will drop at least 30-40% as well if implemented. Heck overnight your property is worth less just due to the announcement......

If your in negotiations with an owner.... Play hardball!

desert dream

This is a not good news for the real estate market. Transactions will slow down hugely, and lots of stock will remain unsold. The euphoria of the last 6 months is over. There is not much scope for new launches as ppl dont have such huge amounts of cash to invest, and for the finished property market, putting down 50% is close to impossible for most. That leaves only cash investors who will look for big discounts.


Enter the words above: Enter the numbers you hear:

All comments are subject to approval before appearing

Features & Analysis
The curious case of David Haigh

The curious case of David Haigh

The story of how the former Leeds United boss went from football...

1
How Mashreq hits the sweet spot

How Mashreq hits the sweet spot

Mashreq’s retail operations in a series of Middle Eastern markets...

2
Q&A with Noor Bank

Q&A with Noor Bank

Kazim Ali, head of corporate banking at Noor Bank, discusses...

Most Discussed
  • 20
    Why Dubai should consider removing the rent cap

    I think the columnist is a property owner in Dubai and is speaking for himself, he has no real concern for tenants and past history of tenant abuse by... more

    Monday, 24 November 2014 12:39 PM - bre
  • 14
    Life sentence for London hammer attacker

    For such a horrific and monstrous crime, death sentence is the least they could hand out.
    Lives of these women have been ruined, mental trauma and... more

    Tuesday, 18 November 2014 12:57 PM - MOSA
  • 5
    Is this the end of F1?

    Aside from the wranglings of teams, their principals and financiers. There is the case for technical regulations and even competition. The need to bring... more

    Monday, 24 November 2014 2:30 PM - Vincent