Call to loosen UAE mortgage cap, boosting first-time buyers’ prospects

A survey of Dubai brokers found that 75 per cent expect new buyer inquiries to pick up in the final quarter of the year. Karim Sahib / AFP

The UAE Central Bank should consider cutting the mortgage cap for first-time buyers to encourage more residents to become homeowners, according to Kensington Exclusive Properties' head of sales, Mario Volpi.

Speaking as part of a panel at an industry breakfast briefing event held on Tuesday by property consultancy Cavendish Maxwell, Mr Volpi said that while he welcomed additional interest from investors in cut-price schemes like Dubai South’s The Pulse district, the cost of buying a property – by which he means the 25 per cent deposit payable by expatriates, coupled with fees and expenses – is “preventing a lot of people from jumping on” to the property ladder.

"There is this big wish to buy property in Dubai," said Mr Volpi, who also writes a regular advice column for The National. He said there were many ways for those people buying to prove homes are for their own use, and that methods of helping this should be encouraged by authorities.

“While I get why you have to put a larger deposit down with some of the problems we had during the global financial crisis in 2008-09, I think we have learnt from that and that careful lending definitely is the order of the day.

"I would propose that a first-time buyer be allowed to get greater finance than the 75 per cent as an expat – or indeed as a local, 80 per cent. If they then want a second property, they could just have a 50 per cent mortgage. But the first one – to give them an opportunity to get on board – would be a great help to the market."

He said that when fees are added into the equation, a buyer often has to find 31 to 32 per cent of a purchase price up front.

“Don’t forget that first-time buyer is living somewhere right now. They are trying to save this 31-32 per cent, but they still have to pay their rent, their school fees, commute to work, Salik, petrol … all of these things are preventing a buyer either from putting a greater amount into their savings pot to reach the promised land of 31-32 per cent.”

Jean-Luc Desbois, the managing director of Dubai-based mortgage consultancy business Home Matters, argued that banks could play their part by amortising the cost of fees over the lifespan of a mortgage.

“The Central Bank regulation that came in on December 28, 2013 was quite specific that bankers weren’t allowed to lend to subsidise deposits. But the regulation is a guidance note, it’s not a hard and fast rule,” he said.

“We already have banks in this marketplace today who will finance a percentage of the fees and add them on to the mortgage. I don’t think the population generally knows that.

“There’s nothing wrong with that – it’s down to the bank’s appetite.”

During the event, Cavendish Maxwell unveiled its third quarter residential market report for Dubai, which revealed marginal quarter-on-quarter declines in apartment prices of 1.3 per cent over the past three months. Transaction levels have broadly remained flat year-on-year.

A sentiment survey carried out among its broker network found that 75 per cent expect new buyer inquiries to pick up in the final quarter of the year, and 69 per cent expect an increase in agreed sales.

However, gloom remains around transaction prices, with 31 per cent expecting further declines in apartment prices against 22 per cent forecasting increases. The remaining 47 per cent expect no change.

In terms of apartment rents, 37 per cent expect a decline and only 8 per cent predict an increase, with 55 per cent forecasting no change.

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