Residential News
Mortgage Market
One of the leading factors in Dubai’s real estate downturn has been the absence of available mortgage products. With credit slowly easing after its freeze this past winter, are home loans now more obtainable? Independent Finance’s Chris Green discusses the current state of the industry.
Most crucially, banks lend relative to their expectations of repayment. By how much have defaults on home mortgages gone up in the second quarter of this year in the UAE?
The true default rate in the UAE will only be known be when the Central Bank has correlated all of the data from the financials of each mortgage lender in the UAE and attempted to get a clear, aggregated picture. However, we know mortgage performance has deteriorated in the second quarter and will likely worsen still before getting better.
Banks have been under stress and have tightened lending standards to shore up their capital base, but fortunately we are now seeing easing up of interest rates, which in turn helps current mortgage clients more easily make their payments.
We need to observe international trends and perhaps calculate from such observation where we are and what we can expect to see. I have no doubt that we have seen at least a few percent increase in home mortgage defaulting over the past 6 months. We will see more than 5% of mortgaged homeowners being more than 30 days late on their mortgage payments and this will have increased by more than 25% from the levels last year. That is a normal worldwide trend, however.
Interestingly, the handling of these increased liabilities has produced very innovative ideas from banks in terms of restructuring client deals, holiday payment plans and one-on-one talks with such clients. We need to remember that lenders, besides being compassionate and helping those that are currently looking for finance in any form, also have good reason to be wary. Bank credit card and personal loans delinquency is at its highest level in the past two years. The positive sign is that with lenders requiring larger deposits from clients, we are seeing a more controlled and managed lending trend where credit risk criteria and the management thereof is improving daily. Leverage is reducing, which is clearly good for the fundamental soundness of the industry.
What do you predict after the summer - do you see defaults continuing up or do you think stabilisation will return to the market?
The advantage that the UAE has right now is that we have been through the “switch off the lights phase” in quarter one, and the “tightening of lending and increased deposit phase” in quarter two. Sincere backing by the UAE Central Bank for the banking sector has mitigated uncertainty throughout this period. School holidays and what many people believe to be the “Last Great Trek” from Dubai will are the remaining variables to watch. This experience will give observers the clearest view thus far of the financial sector trajectory in the UAE; where the mortgage market stands; what defaults have actually occurred and which are just hiccups in the payment process.
For the first time, lenders will have had a full year of very tough and trying times in managing the market, through which personally I feel they have done an excellent job. I know many people will not agree with this statement, but if you are here for the long haul, then you can clearly see why banking has had to make the difficult choices of retracting easy credit. Will the industry stabilize? The answer is definitely yes. When? If you look at the message and the action behind many banks, it is already happening. I believe we will have a stable 4th quarter in comparison to 2008 and we will start working as a normalised market thereafter.
Chris Green is Managing Director of Independent Finance, and industry-leading UAE mortgage consultancy.
Marina Triumphs
Dubai’s “Original Ambition” has met high expectations. As one of the first megaprojects launched in the Emirate, Dubai Marina has been at the center of the city’s development. The community has been growing for years now, with new towers coming online almost every month. The expanding population is mostly made of expatriates, ranging from young singles to families and retirees. Demand for the Marina hardly let up, and it’s not hard to understand why.
Within the vicinity, one can find practically every service desired. Hundreds of restaurants have opened, offering cuisines of all varieties. Residents are overwhelmed with options for dry cleaners and hair stylists, and coffee drinkers can enjoy a different latte for every day of the month.
Property in the Marina is likewise varied, with affordable studios, custom 2-bedroom pads, and epic penthouse palaces overlooking the self-ascribed Eighth Wonder of the World, Palm Jumeirah. Even office towers have started opening their doors. With the range of nationalities present, it seems the entire world has been captured in a kilometer.
Traffic here earned a bad reputation early on, but has significantly benefited from new bridges and expanded highways, doubled in capacity almost before their original concrete was dry. Connectivity with the rest of Dubai is continually improving, and two Metro stations will directly service a quarter of the Marina’s 200 towers.
Even after all this growth, this community has not slowed down. The “Tallest Block” on the north end rises upwards still, with almost a dozen 80+ storey towers reaching as high as their financing will take them. With the market downturn, prices in the Marina have dropped considerably, and this freefall in prices has kept the residents coming.
The Marina has come to demonstrate the viability of Dubai’s ambition – a thriving, diverse tapestry of culture and capitalism.
Click here to see what’s currently available in Dubai Marina.
Open House Events Come of Age
Better Homes has engaged in a number of promotions and campaigns throughout the first half of 2009, where it has focused on offering carefully selected units to its clients, through various marketing methods and channels, within both the sales and leasing segments of its business. The most popular of these methods has undoubtedly been the Open House events.
Over the past few weeks in particular, Better Homes has witnessed significant positive results at two of the largest Open House days it has hosted – the first in Discovery Gardens and the second at Jumeirah Beach Residence in Dubai Marina. “Discovery Gardens was fantastic,” expressed Marketing Manager James Gauduchon, “Our call centre received over 1,400 calls during the event and over 50 leases were signed that day.” Better Homes likewise recorded an overwhelming response at the Jumeirah Beach Residence event. “There were no signs of repressed customers during our Open Day weekend” said Jannie Biddulph, Sales Manager, Better Homes. “Our Open Day promotion received over 350 walk-in customers, seeking both properties for sale and for rent.”
With general enquiries on the increase and talk in the market of mortgages becoming more easily available, Better Homes expects to see continued success in leasing and see an increase in property purchases sooner than many had expected. “As soon as lending becomes available at a wider scale, we expect to see a rise in sales transactions,” said Ms Billy Rautenbach, Director of Operations, “It is difficult to forecast an exact trend, but if the UAE real estate market, specifically in Dubai, is bottoming out as some are suggesting, then now would be the definitive time to invest in property.”
Open House events are held every week throughout Dubai, showcasing both sales and leasing property ranging from studios to penthouses and villas. The events are a great way to view several properties in one day, and to see what kind of property is available on any budget and in almost any location in Dubai.
To see a schedule of upcoming Open House events, visit bhomes.com/openhouse
Prices moving… up?
It seems that the worst may well be over for Dubai property prices. While many experts predicted prices to continue falling throughout the remainder of 2009, several communities have actually increased transaction prices in May and June from a month earlier. This trend isn’t universal – certain communities have continued decreasing – but the universal free fall across Dubai which started in December 2008 has subsided. Indeed, our own State of the Market report predicted prices to continue falling for some time yet, but this is one prediction we’ll be happy to be wrong about if trend has truly changed.
So what is this assertion based on? Well, the June issue of Better Homes magazine highlighted the price increase at The Springs, where 2-bedroom villas were selling at AED 1 million in April and then 1.2 million in May. The Springs anecdote can now be seen in several other communities which have registered increases in their transacted prices, not just asking prices, month on month. Here are some examples:
Certainly, many other communities are still seeing declines, but current figures are suggesting that now is perhaps a great time to get into Dubai property as a medium to long term investment. With property competitively priced throughout the Emirate, investors’ money can go much further. There are indeed incredible deals currently on the market for opportunistic investors.
For more information on current market trends and investment opportunities, please contact a Better Homes consultant at +971 600 52 2212 or visit bhomes.com.
Dubai Metro’s Impact on Property Prices
The introduction of a new metro line in Dubai could mean house prices in the area begin to rise, according to one expert.
Dubai-based Investment Boutique, which monitors property prices, told the Khaleej Times that areas like Jumeirah Lakes Towers and Business Bay could see prices increase by ten per cent after the Red Line is launched in September. Safeena Rangooni-Lakdawala, head of research at Investment Boutique, said: “In cases around the world where a new metro system has been introduced, we have seen a premium on properties nearby the stations.” She added that although Dubai is not a city which depends much on public transport, the areas which are close to metro links will always be more desirable and will have higher prices as a result.
More recently, pricing of the actual Metro fares has been released at surprisingly low levels, which is further good news for property located in the vicinity of Metro stations. Fares will range from a minimum of AED 1.80 to a maximum of AED 6.50 for a single journey. Prices for the more luxurious Gold Class tickets are moderately higher, with a range of AED 3.60 to AED 13, respectively. Furthermore, the fares will include travel on public road buses and water buses. This allows a passenger to continue his or her journey from the Metro to other modes of transportation without paying any additional fare. There are numerous fare options, including monthly passes, and rechargeable electronic cards.
Interested in purchasing some property near a Metro station before the trains start running in September? Give us a call at +971 600 52 2212 or visit bhomes.com
Lease at Rotana’s Park Residence in Abu Dhabi
Better Homes in Abu Dhabi has secured a lease agreement with Arjaan Rotana for its new project, Park Residence.
Park Residence, developed by prestigious Rotana, is a modern residential development adjacent to the 5-star Park Rotana Hotel. The project offers convenient living with fully equipped kitchens, swimming pool, gym and security within a hotel complex. Ideal for both executives and families, this new development offers spacious apartments with excellent finishes and undercover parking.
Located in Khalifa Park (Maqtaa Bridge area of Abu Dhabi), Park Residence is close to the business and banking district, schools, and shopping malls, and is only 10 minutes away from the Abu Dhabi International Exhibitions Centre and 20km from the International Airport. The project has easy access to the major road networks in the area, providing efficient transportation throughout the emirate.
Park Residence will be handed over on September 1, 2009. This is a great opportunity to lease your new home in the heart of Abu Dhabi. For all leasing enquiries, please contact a Better Homes leasing consultant on +971 600 52 2212.
