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Price war is good news for buyers
Renan Bourdeau (PROPERTY FOCUS) / 13 May 2012
After a long period of time when all we seem to have heard in the media is bad news about the global economy it seems that, in the UAE at least, things are starting to look brighter for investors and property hunters.
In my role as the managing director and partner of the leading property portal in the UAE, I speak regularly with brokers and financial experts in the country who give their insights into market changes and the latest outlooks — and the mood now seems to be upbeat.
Indeed, here at propertyfinder.ae we have observed a definite increase in enquiries which would logically translate into more transactions. And with a price increase in certain residential areas, the market appears to be back on track.
Financial reports show that the liquidity that left Dubai in the collapse of 2008 and 2009 is returning very quickly — massively helped along by a combination of Arab Spring money in search of a safe haven and record high oil revenues. In fact, experts report around $60 billion have come to the UAE since the uprisings began. The exodus of money, citizens and tourists from the nations affected by the Arab Spring protests has been enormous — and of course, Dubai is a popular destination for wealthy people who want to safeguard their cash in a secure country.
The property market was on a downward slide, hit bottom and now has started rising back up and lenders are keen to make the most of this swing — which is good news for buyers. Lots of players have moved into the market place with 19 active lenders out there, so a price war is brewing and rates are coming down.
We have seen interest rates as low as four per cent, but the typical low rate is around five per cent.
In terms of down payment the average appears to be 20 per cent, but in certain cases this is also lower with some lenders offering 10 per cent.
So, the view on all sides is that the curve has definitely turned and now is a good time to buy.
Sam Wani, the general manager of Independent Finance, says that there is no doubt there has been a revival of the mortgage market due to this influx of liquidity. However, he does issue a caution for would-be buyers that although lenders are more flexible generally this time around, underwriters are standing firm on most pre-approval criteria.
However, the salary requirement for getting a mortgage has reduced from Dh25,000 to Dh15,000 for many banks — which is a step in the right direction.
One other positive piece of news is the start of non-resident mortgages, which means that non-resident investors can now raise loan-to-values of up to 70 per cent with rates ranging between 6.5 and eight per cent.
These days it is not necessarily more expensive to buy than rent. A buyer I heard about this week was purchasing a three-bedroom property in JBR in the Marina for Dh2.5 million. He was given a rate of 4.99 per cent with a down payment of 20 per cent — leaving his monthly installment at Dh11,600. His rent for the same property would be in the region of Dh10,000 to Dh15,000.
Just two years ago interest rates were somewhere between eight and 10 per cent and now they are at around five per cent, meaning they have almost halved — which has to be a reason to be cheerful.
We are gradually returning to a situation where you don’t have to be a cash buyer to purchase property in the UAE. Rates are low and lenders are willing to assist, although we do still need banks to be more flexible in the application process and with lending criteria — which is not to say we want to return to the unrestrained environment of 2007.
I believe that second time round, if lessons have been learned, the outlook should be rosy for us all.
Renan Bourdeau is the managing director at property portal www.propertyfinder.ae. The views expressed are his own and do not reflect the newspaper’s policy.
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