HSBC Holdings is making it easier for home buyers to get home loans in Dubai, as one of the real estate market shows signs of improvement.
HSBC Bank Middle East Ltd. reduced interest rates on 25-year mortgages by 76 basis points to 5.49 percent, said James Pearson, head of assets and liabilities. The company also lowered its down-payment requirements.
Mortgage financing in Dubai ground to a halt after the global credit crisis caused prices to plunge by more than 60 percent and forced the United Arab Emirates’ two biggest mortgage providers to stop lending for almost two years. An improving economy has helped end a slide in property values in completed developments such as Palm Jumeirah, Emirates Hills and The Greens in the last six months, encouraging banks to increase lending. Impairments on all U.A.E loans fell by half in 2010 from the year earlier, according to HSBC Middle East. The unit had $24.6 billion in loans and advances to customers in the Middle East and North Africa last year.
Smaller Down-Payments
The bank increased the amount of money it’s prepared to lend to house buyers to as much as 80 percent of the property’s value from 70 percent. The loan-to-value ratio for purchasers of apartments is about 70 percent because a “significant” increase in supply in 2011 and 2012 will put pressure on prices, Pearson said in last week’s interview.
HSBC Middle East also lowered its monthly salary requirement for borrowers by 25 percent to 15,000 dirhams ($4,080).
Jones Lang LaSalle Inc. estimates that 54,000 homes will come onto the market in Dubai from 2011 to 2015. That’s about 15 percent to 20 percent of the existing supply, according to Jesse Downs, director for Middle East and North Africa at the property broker.
Mortgage demand has plummeted since the days of Dubai’s property boom, when speculators frequently bought yet-to-be- built homes and sold them at a profit before a single brick was laid. These days most home loans are for completed properties in developments with infrastructure and facilities.
While there is a gradual increase in U.A.E. mortgage lending, the market is far short of a real recovery, said Tarik El Mejjad a London-based analyst for Nomura International Plc.
There is competition over interest rates and banks are trying to resume mortgage lending. House prices are likely to decline by an additional 10 percent to 15 percent next year and service fees levied by developers for maintenance of common areas will continue to prevent a significant recovery.
Economic growth in the U.A.E. will accelerate to 3.3 percent this year from 3.2 percent in 2010, while Dubai’s economy will grow by 3 percent, according to the International Monetary Fund. Dubai GDP increased by 2.2 percent last year, according to the emirate’s statistics bureau.
