It is hard to get an exact description for the UAE property market at the moment. The Dubai Land Department figures continue to show a flow of regular sales albeit at distressed prices, while nobody is trying to sell at the price levels of last autumn is stuck with their real estate with no sign of a potential buyer.
According to the real estate agents 20-40% price reduction are now necessary to secure a sale. Dubai has been suffering a very sharp drop in prices, in a short period, but actually fairly typical of a market correction in an emerging one.
It is also true that lending conditions have become much tougher. I am new in real estate industry as an accountant. Almost every day I receive calls from our tenants requesting for holding their checks because they don’t have enough balance on their account, their salary has not yet transferred or processed. These are just simple alibis. As an accountant, I have no doubts that these people are telling me the half-truth. But what is more unbelievable is that when some tenants reasoned out that their personal loans have not yet approved or released by the bank. During the recession period, Dubai banks are becoming more conservative. Many banks are not granting anymore personal loans and credit cards especially to expatriates working in the real estate companies. A couple of weeks ago I was wondering why I couldn’t use my First Gulf Bank credit card. I called the customer service and found out that my credit limit was reduced. I was surprised. I did not even receive a notice about the reduction. Banks are desperate and dried up.
But it is an exaggeration to think that bank lending has dried up entirely in the UAE. Last week, my officemate received a ring from Standard Chartered Bank asking for possible customers for its mortgages. As a homeowner and without mortgages, the bank immediately agreed to lend her up to 70% of the value of her villa with a mortgage rate of around 8%.
I can see the bank’s risk is pretty low if an existing owner re-mortgages to buy a second property, but it certainly flies in the face of the idea that bank finance is impossible in the UAE right now. You might need a higher salary and require a higher deposit but it looks as if mortgages rates are already in decline. The UAE Central Bank base rate cut from 1.5% to 1% is having an impact.