10/06/2009 11:30 PM | By Saifur Rahman, Business Editor
Dubai: The UAE's property market could take off faster than predicted if among others, banks and mortgage lenders open the tap, industry officials say.
The market has been eagerly awaiting the merger of Amlak and Tamweel - the two biggest mortgage lenders - who have stopped offering new mortgages since the merger move late last year and which is pending the government's final approval.
Developers and real estate analysts believe the property market could take off faster if funds were channelled through mortgage lenders, especially at the backdrop of the 50 per cent decline in property prices, making them attractive to end-users.
Many end-users who have either been sidelined by speculators and brokers or been shying away from the market for a long time, have suddenly become the 'king' and prime target of developers and brokers.
"With speculative buyers almost entirely out of the market, demand for residential property is currently being driven by end-users and long-term investors. Banks and a select number of mortgage lenders have eased financing restrictions, yet the majority of potential buyers are still unable to purchase property," Jones Lang LaSalle said in its latest report on Dubai released yesterday.
"Cash buyers are able to find good deals since they can negotiate prices down considerably. Most sales are taking place for completed units as demand for off-plan property is close to nil, given the uncertainty surrounding project cancellations."
Thousands of housing units are going to be delivered in the next few months, with very few new takers.
Dubai Properties Group (DPG) yesterday said it has commenced the handover of 2,387 high-end units at the residential and commercial towers of the Executive Towers development, located in Business Bay. Dubai Silicon Oasis is delivering 400 villas, and Deyaar is handing over some projects this year.
Developers, however, remain optimistic.
"This market is not different from others. We see liquidity returning to the market as it matures with more serious buyers entering the real estate sector," Khalid Al Malek, DPG chief executive, told Gulf News.
"Mortgage remains an issue and we are addressing that by tying up with leading financial institutions. to support our customers. However, as a group, we do not intend to launch our own mortgage arm."
Banks were lending money when people needed mortgages less, property developers and analysts have been saying. They have now become stingier when most end-users are looking for mortgages as supplies are abundant.
"Banks should increase their mortgage finance capabilities as the market is maturing with more serious buyers entering the market," Dr Wan Sulaiman, adviser-in-charge for Tanmiyat, a property developer, told Gulf News. "People will have to think like end-users in the market, and not like speculators."
However, despite market limitations, mortgages grew last year. Total credit extended to the UAE real estate sector has been growing at a double-digit rate.
"Real estate mortgage loans stood at Dh115.7 billion in the first nine months of 2008, compared to Dh58.8 billion in 2007, a growth rate of 96.6 per cent," Hamad Bu Amim, director-general of the Dubai Chamber of Commerce and Industry said.
Wazir Ali Daredia, executive director and CEO of Trident International Holdings, which is developing the 124th floor of the world's tallest residential tower Pentominium, said, "One of the key areas will be the credibility of the developers, the delivery track record and the quality of products and services. Customers are becoming mature and they will look at the developer's track record and profile before buying."
Outlook: Hamdan confident
Shaikh Hamdan Bin Mohammad Bin Rashid Al Maktoum, Crown Prince of Dubai, expressed his confidence in the UAE economy to continue to attract foreign investments and capital.
"The UAE will remain a safe haven for national and foreign investments because it is governed by strong economic rules and legislation," Shaikh Hamdan said as he inaugurated Cityscape Dubai 2009 on Monday.
He added that the national economy is strong and coherent and is based on the vision of President His Highness Shaikh Khalifa Bin Zayed Al Nahyan and His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai.
Shaikh Hamdan pointed to the awareness of national companies and the private sector about the importance of conducting studies and planning, as well as of being updated on regional and global economic conditions, to face global changes.