Will Dubai ever match Abu Dhabi for home finance?
Posted on 15 August 2010 with 4 comments from readers
If only Dubai could match the 5.75 per cent home finance rates currently being offered by Abu Dhabi Finance that would go a long way towards reviving the Dubai real estate market which is still deep in recession almost two years since the sudden stop.
Since its launch in November 2008, Abu Dhabi Finance has extended its reach and now covers more than 70 per cent of the Abu Dhabi market. The mortgage provider offers finance for a full range of properties, from studio apartments to exclusive villas, and from Reem Island to Saadiyat Island and Abu Dhabi Island itself.
Strong home lender
Other Developers currently covered by Abu Dhabi Finance include Aldar Properties, Sorouh Real Estate, Tourism Development and Investment Company, Capitala, Green Emirates Properties, Profile Group Properties and RAK Properties.
Abu Dhabi Finance offers the lowest interest rates in the UAE, starting from 5.75 per cent, in addition to a number of other benefits, including a loan-to-value ratio of up to 85 per cent, mortgage tenures of up to 30 years, and a range of repayment options, including the choice of having a one-month payment holiday per year.
These are mortgage conditions that borrowers in Dubai can only dream about. Only the very best customers would get a mortgage offer anywhere close to this in Dubai.
Indeed, the previous top mortgage lenders Amlak Finance and Tamweel have been deadlocked in merger talks since the crisis started, and have not made a single new mortgage loan in that time. These two Islamic home loan companies occupied a similar status to Abu Dhabi Finance during the Dubai boom but have vanished.
Global giants
Into the breach have stepped the giants of global home loans like HSBC and Standard Chartered Bank. However, far from lowering rates the fear in the Dubai home loan market at the moment is that mortgage rates may be about to go up.
This is the last thing that the depressed Dubai real estate sector needs. There is already pressure from the constant releases of newly finished property on to the market, and a rise in the cost of borrowing would do nothing to help boost buyer confidence, quite apart from making homes too expensive to buy for some mortgage customers.
But there is a good business in Dubai for home lending, and you really have to wonder why Abu Dhabi Finance does not step into take this opportunity. This is a great opportunity and presently the market is wide open.
4 Comments posted by readers:
ADF is essentially a vendor finance vehicle that is mostly owned by the major developers to facilitate the purchase of property that is being developed by these entities.
It is a smart move to keep the pipeline of projects rolling but may take a hit if prices dip
another 15%-20% lower in AD.
That said real estate is a long-term investment (as many are now finding out) and if you are paying the equivalent of the ridiculously high AD rent into your mortgage & are not at the mercy of a landlords increase it might make sense.
The RE situation in Dubai looks bleak for some time to come – Strata Law is going to flush out a whole heap of Community/Building unfunded cost that wont be pretty, falling rents & prices, more & more supply, dodgy developers & projects, weak job market, high interest rates, totally burnt foreign investors……all not positive signs to enter this market yet.
Nothing wrong with high rates
Nothing wrong with high borrowing rates – might make housing prices and rents more affordable for a change.
My guess is that Dubai is a rotting real estate carcass. I expect average values to fall by at least 30-50% from today’s levels. The Dubai Real Estate engine was a complete circus! We are now enjoying the long path back to normality. Even if an upward bounce occured, the remaining developers would dust off their cement mixers and start increasing capacity to unrealistic levels again. I haven’t found a shred of information or data to support the view that Dubai Real Estate is a buy. Clueless agents, unbelievably bad levels of construction and build quality, sky-high maintenance costs (and getting much higher now subsidies are being removed), a property rotting climate for 4-6 months of the year are the reality if you are based here. I agree that Dubai is by far the leading regional hub with superb infrastructure but that doesn’t make real estate attractive. Very depressed priced labour camps are probably the best buy.