Real estate financing remains difficult as banks withhold products

Chris Dommett, CEO of mortgage broker John Charcol Middle East, told delegates at a Cityscape Connect conference that the past three to four months had seen confidence start to return to the market, resulting in investors willing to look at purchasing properties.

The type of buyer now on the market was characterised as being end user, driven by a longer term investment/occupancy view.

'Interest rates have come down, it's now possible to get rates of 6.75% at some banks and I think that they will continue to come down as liquidity improves,' said Dommett. 'Although others are still at the 9% mark.'

Dommett also cautioned that banks that are lending were applying much stricter criteria to potential customers than previously, including only financing properties that were finished or nearing completion and selecting applicants that could prove steady employment, salaries and realistic repayment plans.

'The good news is that banks are now looking at applications again, whereas a lot of them went through stages of rejecting everything straight out,' said Dommett, although he cautioned that this only referred to individual financing. 'There is still very little appetite for commercial financing, say whole floors or buildings where the investor needs hundreds of millions of dirhams - for these we would be looking at foreign funds.'

Despite the opening up of mortgage offerings, banks are still only offering basic packages to customers. 'There is no differentiation of product between banks as no one wants to be the one to offer something that brings with it a higher risk, although we will likely see a return of buy-to-let products.

'I can see more banks coming into the market so rates will come down, although some banks will stay out of it until they are sure it has reached a bottom, having been bitten quite severely. I can see it going back to an 85% loan-to-value ratio, but not the 90% or 95% that it was.'

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