Mortgage cap is there for a good reason

Would Dubai's property market be healthier if the mortgage cap was eased? Satish Kumar / The National
Would Dubai's property market be healthier if the mortgage cap was eased? Satish Kumar / The National

Even with Dubai’s property market remaining stubbornly sluggish, few would seek a return to the days of the last housing boom when soaring prices and rampant flipping of off-plan properties were suddenly replaced by a collapse in values. As we reported yesterday, many people are expecting prices to recover over the next year but are concerned that they are being kept out of the property market – and reaping the rewards of rising prices – by the mortgage caps that set minimum deposits.

More than seven out of 10 people surveyed by property broker Core Savills in Dubai say they want the government to relax the mortgage caps. One quarter of those polled say they want to buy property in Dubai but are being prevented by the rules that expatriates have to have a 25 per cent deposit for properties of less than Dh5 million. The figure for Emiratis is 20 per cent.

There are many compelling reasons to invest in property. These range from financial – including not feeling one is wasting money on rent when it would cost a similar amount to service a mortgage, and the financial windfall when house prices rise – to less tangible factors, such as the freedom to make improvements such as building a swimming pool and not being at the whim of a landlord, who can opt to move into the property or to raise the rent sharply.

For the UAE and its large expatriate population, buying property is an important sign of stability and investment – literally and figuratively – in the country’s fortunes. Those who seek to buy property ought to face as few impediments as possible.

However, this has to be balanced against the reason why the mortgage caps were imposed in the first place. The days when a property was bought off-plan and sold on repeatedly long before construction even began is not the recipe for economic stability, as the events of 2008 to 2010 showed.

There are other ways to influence the market without the dramatic step of relaxing mortgage caps. Although it is true the dirham’s peg to the dollar eliminates many of the traditional ways other governments manage their economies, there are options available to the Government to direct prudent growth in the housing market.

The mortgage caps were introduced to ensure long-term viability of our property market and despite some frustration by would-be buyers and vendors, maintaining that is in society’s interests.

Published: September 8, 2016 04:00 AM


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