Home loan ratios in the UAE strongly impacted by global liquidity squeeze

According to Chris Dommett, CEO of John Charcol Dubai, major regional and international banks have become more conservative in their lending, with many cutting their loan-to-value (LTV) ratios by as much as 25% due to global financial uncertainties.

Some banks lowered the maximum amount they are willing to lend against the purchase price of a property from 90% to 75%, while others have dropped their loan-to-value ratios from 90% to 65%.

This has led major developers such as Emaar to adopt more flexible payment plans and financing schemes in order to compensate for this funding gap.

"The trend toward lower loan to value ratios is making it more difficult for end users to purchase property and developers are taking action to minimize the effect this may have on the real estate market,"

says Chris Dommett.

Under the scheme, banks would agree to finance potential homeowners on the basis that the developer pays a portion of the purchase price before the borrower comes up with the full downpayment, resulting in the developers assuming the risk.

"The current situation in the UAE real estate market has introduced greater responsibility into property investment in the Gulf region. Industry stakeholders are taking a closer look at what needs to be done to keep the real estate market strong."

says Dommett.

UAE banks are hoping that the UAE Central Bank will inject liquidity into the market, as they prepare for the significant amount of capital required to finance the high number of properties coming to the market in the next 24 months.

John Charcol Dubai takes the complexity out of the mortgage selection process by offering independent mortgage advice and quality brokerage services that provide speed and transparency every step of the way.