The UAE’s mortgage market is on a growth path as some of the banks have started lending, said Chesterton, an international property agency.

Chesterton, which has its Middle Eastern headquarters in Abu Dhabi, is one of the UK’s leading property consultancies with a full range of property services including residential sales and rentals, commercial agency and management, rural land management, professional advisory services, professional valuation and other surveying services. 

“The contrast between the mortgage repayments per month compared with renting the same property is getting closer and is much needed to reinvigorate the property market, said Robin Teh, director, valuations and research, Chesterton International.

“With a more structured and reputable service being provided by valuation firms and new panel of valuers being appointed by some banks, the security of loans and affordability of finance is reassuring. The initial concerns over mortgages appear to be improving with a number of banks including Standard Chartered, HSBC and Abu Dhabi Finance offering loans at significantly reduced rates. These rates have dropped between 200 – 300 basis points (approximately 30 per cent of previous rates) whilst loan to value ratios still remain cautious (up to 85 per cent in most cases),” he said.
 
“This was exactly the move that the market needed. Once completion of projects is imminent we would anticipate that the number of mortgages will increase. The remainder of 2010 will see the completion of many of the major projects in Abu Dhabi such as Al Bandar (Raha Beach), Arabian Phase and Desert Community (Al Reef), Marina Square and Sky & Sun Tower in Reem Island. The bottoming out of prices should coincide with handover of these units. This should reinvigorate the property market and offer added security to purchasers and banks alike,” added Teh.

“There has been a noticeable change in the property market where property prices appear to have stabilised. This has not been through the calming of the global economy, but the key fundamental characteristics of the Abu Dhabi market. The population of Abu Dhabi still has a need for housing regardless of global climates and with high rental levels remaining, owner occupation is the alternative. However the projects will get affected until major master developments in Abu Dhabi are fully complete and offer community facilities, shops and leisure facilities. The rent payable for some of these schemes is similar to those in Dubai and as such some tenants are now looking to move back to Abu Dhabi, though outside the Main Island,” added Teh.

On the rental market in Abu Dhabi, Teh said: “Looking at the rental market, many noted the reduction in housing allowances in the mid to latter part of 2009. This is now becoming more apparent as tenancy agreements end and tenants look to more affordable accommodation. The underlying trend of high prices for apartments in the city forces occupiers off the island, increasing void levels. Prices have fallen up to 15 per cent in the last 12 months in some areas, whilst oversupplied apartments (2 bedrooms most notably) have also noted drops of up to 10 per cent. This is likely to continue through 2010,” he said.

“At present we would estimate that rents are still approximately 30 per cent above affordability for the majority. Current tenants in Abu Dhabi seek affordable housing due to reduced housing allowances. This has been witnessed by the shift to Dubai of many former tenants of Abu Dhabi. The new master schemes will need to be priced correctly to attract these tenants back, and entice those away from the main island. Indicatively the rents should be somewhere in the middle of the current Abu Dhabi and Dubai rents. Asking rents which are too high will lead to prolonged voids and continuing migration to other areas of Abu Dhabi and Dubai,” said Teh. – TradeArabia News Service