Home mortgages revive

Banks and lending agencies in the UAE are witnessing healthy growth in residential real estate mortgages, suggesting prices may be reaching levels at which end-users are once again interested in properties. 

HSBC in the UAE has seen the value of mortgage lending grow by a quarter in Q2 over Q1 2009, a senior bank official told Emirates Business. "The growth in Q2 over Q1 is more than 25 per cent," said Venkatesh Srikantan, Regional Head of Assets and Liabilities, HSBC Middle East. 

"As price expectations between sellers and buyers are converging, there are more transactions happening both for property sales and mortgages," he said. 

Abu Dhabi Finance (ADF), a mortgage financier in the UAE, has announced an agreement to offer mortgages for Green Emirates Properties, which it claimed extends its reach to cover almost 75 per cent of the property market in Abu Dhabi. "Since we launched last November, the number of leads and the number of mortgage applications we have received have far surpassed our initial expectations," said Philip Ward, CEO of ADF. 

"We're definitely writing more mortgage cheques now than in the first quarter of the year," added a senior Dubai-based banker, who declined to be identified. 

Home prices in the UAE, particularly off-plan properties, have seen considerable declines since their peak in the third quarter of 2008. 

However, green shoots of recovery are now sprouting in the real estate sector of the UAE, with the number of transactions going up over the troughs witnessed in the previous two quarters. Also buoying the market is the UAE Central Bank's reduction in interest rates and the consequent reduction in the Emirates Inter-Bank Lending Rate. According to a recent report by Colliers International, there has been a 50 per cent increase in mortgage transactions in Dubai's residential real estate in the second quarter of 2009 compared with the first quarter this year. 

"With prices corrected to realistic levels, Dubai has suddenly become a hotbed of affordable properties guaranteeing high returns in the long term," said an analyst at Gowealthy.com.

"According to our estimates, prices could continue to drop in Q3 of 2009 and thereafter climb in Q4 when consumer confidence would perk up as a result of higher oil prices," he added.