Dubai mortgage lending on the rise

  • October 30, 2018

Dubai mortgage lending on the rise

Home financing in Dubai is on the rise, as end-users and final handover payments seek funds. Returning buyer, numerous completed developments and attractive payment plans for off-plan create this new market landscape in the Emirate.

“Major disbursements are falling during handover and banks are generous enough to consider such cases for review and facilitate funding upon receiving the completion certificate and handover letter from the developer,” says Dhiren Gupta, managing director, 4C Mortgage Consultancy.

During Q2, a rise in the number of equity release inquiries was recorded as market conditions remain favourable in Dubai. As prices have bottomed out, buyers are taking advantage of this to release equity in their homes in hopes of upsizing or diversifying their portfolios.

The average mortgage size in Dubai in the current market is Dh1.5 million. If it’s a first home purchase, the loan amount is restricted to 75% of the market price if the property is priced less than Dh5 million.

During the period from January to August 2018, mortgage values reached Dh12.1 billion while villas were the most financed property type accounting for Dh5.7 billion.

Lukman Hajje, CCO of Propertyfinder highlighted that borrowers in Dubai were continually up against new valuation fees and DLD de-registration and re-registration charges until the UAE Central Bank introduced new measures. In June the Central Bank increased the fee from 1% of the outstanding home loan amount, not exceeding Dh10,000, to a maximum of 3% of the loan amount. This came as negative news to many with struggling finances since banks have slowly stopped negotiating a competitive market rate.

‘Faced with an additional potential 3% exit fee, refinancing is usually not viable,” Hajje highlights.

As increased interest rates are expected to continue for the next 18 to 24 months, homeowners are opting for fixed rates which provide stability and security on the long-term.