Asteco sees UAE mortgage market 'gathering pace'

Property consultants say interest rates starting to fall as lenders reassess policies on home loans
Asteco sees UAE mortgage market 'gathering pace'
By Andy Sambidge
Sat 30 Apr 2011 10:42 AM

The UAE's home financing market is "gathering pace" and lenders are finally reacting to increased activity in the real estate market, Asteco has said in a report.

The property consultants said it had seen interest rates decreasing as a result of lenders reassessing their policies on mortgages.

And it also said that a number of lenders had come back to the market.

"At the end of last year, we were hoping to see greater significance in the financing sector and this is something that has definitely gathered pace recently," Asteco said in a Q1 report on the state of the Northern Emirates real estate market.

"With a number of developers entering into the handover stage of their developments, existing buyers waiting for possession are looking for a way of securing the lending they have committed to," the report added.

It said there had also been an increase in the amount of new purchase buyers, with the interest mostly focused on the main parts of Dubai and Abu Dhabi.

"The interest/profit rates still seem to be decreasing after lenders have reviewed their current policies. Locally in the UAE, rates start from 4.99 percents on lower loans to values with the average rate hovering around 5.8 to 6 percent," Asteco said, adding that they were still much more than rates in the UK.

"Lenders are reacting to the increase in elevated activity within this sector, resulting in a number of lenders coming back to the market from both the local and internationally established banks in the region.

"Existing lenders are also looking to secure a larger segment by expanding their lending capabilities; whether this is opening up their approved developments or entering into the Islamic Market, they are fighting forward," Asteco's report added.

Earlier this month, it was reported that mortgage advisors in Dubai were seeing a surge in home loans applicants, despite government data showing only a minimal increase in lending during the first quarter.

Some 871 mortgages were approved in the three months to March 31, 2011, a rise of just 0.69 percent on the year-earlier period, Dubai Land Department figures showed.

The value of home loans issued during the quarter fell more than 25 percent to AED8.03bn ($2.19bn) compared to the same period a year earlier, as real estate prices in the emirate continue to slide.

Though lending remains weak, mortgage advisors argue the data does not adequately represent improving market sentiment, due to a delay in home loans being registered with the Land Department.

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