Tamweel back with 4.99% mortgages as 2010 sales fall 65% in Dubai
Posted on 25 January 2011 with 3 comments from readers
Islamic home lending company Tamweel, whose shares were suspended two years ago and is now majority owned by Dubai Islamic Bank, has returned to the mortgage market with the lowest rate in the UAE at 4.99 per cent.
The announcement came as the latest data from Jones Lang LaSalle revealed a 65 per cent fall in the value of housing transactions in 2010 with third quarter sales down from 1,200 to 600 units. Actual selling prices were 15 per cent below asking prices.
Will cheaper mortgages be a solution to the Dubai property slump? Estimates for new property entering the market this year range from 10-25,000 units. Oversupply is now the biggest problem.
Rents still falling
Buyers are unlikely to enter the market while prices are still falling and rents are also still coming down, though not as fast as last year. But the Tamweel offer does begin to make buying a more attractive option again. Of course this offer will be for a limited period and it is far from certain that rates will stay this low.
For the UAE dirham is pegged to the US dollar and so interest rates are determined by the Federal Reserve. It is presently committed to a low interest rate regime but mortgage rates in the US have been moving up with the bond market’s distress.
If US debts and deficits were to trigger a major bond market crisis then very much higher interest rates would follow. Another reason then for house buyers in Dubai to be weary of making big commitments at this time.
Home loans
However, at least the Tamweel mortgage is a step in the right direction and other lenders will surely have to follow. Globally HSBC and Standard Chartered Bank are among the biggest home lenders.
How much lower could Dubai house prices go before they reach a bottom? Estate agents reckon there is another 15-20 per cent to go, assuming no further global economic disasters and a rising oil price.
Most probably the tide will not really turn in this market until all the units coming up for completion are in the market and supply stabilizes. Then demand can start to catch up, and hopefully gradually raise prices.
3 Comments posted by readers:
Here in Taiwan we are between 2-2.5% depending on your credit history and assets that you may or may not have. To get the housing market back up and running in Dubai they need to drop it further to around 3% or so. 5% is still a bit too expensive. If someone took out a 700,000 Dhm loan at 5% they would be paying 35,000 per year in interest which is almost 3,000 Dhms. per month in interest add that to the local community fees of around 24,000 per year (if you are any where near the JLT area) and you are at 59,000 Dhms. per year before other basic utility bills. At around 5,000 Dhms. per month before ones expenses and utility bills is nothing to sneeze at. I say we tank a good 15-20% from here until we see some more adjustments made.
One of the main reasons the US housing market is not turning around now is because they require everyone now to hand over their income tax returns to see if one qualifies for a home loan. Those that own homes today in the US though are given huge credit limits on their credit cards and good credit scores while all others are brushed off into the corner.
The Dubai Property market needs much more than lower mortgage rates to recover. Even if Tamweel finance your purchase for 0%…. Don’t invest, Don’t invest, Don’t invest.. The more mature property markets like the UK & US have further corrections to endure for sure…But Don’t invest a dirham in property here in Dubai… Just rent…You’ll never regret it!
ummmm 600 sales per month???
10 to 25 thousand NEW UNITS COMING ON LINE???
= 4 to 10 YEARS of supply at current sales rates.
HOPEIUM is the stuff we are all on here kids….
a 5 % variable / floating rate mortgage aint gonna fix it.
stop building, bankrupt the non-viable, shake-out the weak hands, take the medicine, learn from the mistakes – AND GROW TO BE BETTER, WISER, STRONGER.
your competitors all already are……………..
the clock is ticking…………………