A real-estate of affairs

by Zoya Malik

Suffice it to say that property buying can be a very dizzying experience. While researching Dubai’s housing sales market recently, I discovered the numerous perplexing challenges and limitations that house hunters are currently facing, in a lopsided market (expatriates can only buy in certain ear-marked developments), inflated by Dubai’s economic recovery.

 

 Rents surged by 40 per cent last year, boosted by the Expo 2020 excitement and are now forcing tenants to re-assess renewing their leases. Due to these extreme hikes, many long-standing Dubai residents are deciding to take the plunge and enter the property market. However, the UAE Central Bank’s highly anticipated and imminent new regulation on banks’ mortgage-lending caps has caused anxiety among purchasers. Under this regulation, based on a loan-to-value ratio for the first investment up to five million dirhams, expatriates will be limited to borrowing up to 75 per cent of the property value – the challenge being to gather a minimum down payment of 25 per cent. (Currently most banks require a 15 per cent deposit and will finance the balance on various interest-rate terms).

So borrowers, otherwise confident about meeting monthly repayments, will immediately feel the burden of having to find a larger deposit that may effectively price them out of the market. Buyers must also calculate for paying an additional 6 per cent on top of the property price to include the Buyers fee at 2 per cent, the Sellers fee at 2 per cent and the broker’s commission at 2 per cent, which shouldn’t apply if buying directly from the developer. There is also a handling charge by the Land Registry on the purchase. As market pressure bears down, so momentum abounds and prices are rising to squeeze out as much juice and mileage for all interested parties. New projects are now coming on-line at a steady pace in Dubailand, Sports City and Jumierah Village South, but it seems not quickly enough to satisfy this pressing demand. And everyday prices for the same properties are being pushed up due to several unprecedented factors.
In new developments, buyers may be delayed in securing the property of their choice having to await the seller acquiring the title deed to the property from the Land Registry.  Sellers in possession of a title deed have turned this to their advantage and are charging a premium on the advertised prices for their new builds, to take advantage of this time lag. In view of the looming mortgage cap, buyers are submitting to these higher charges as competition heats up between units’ bona fide handovers. Many buyers are even buying properties unseen, in a bid to clinch the best deals of the moment.
Banks are challenged to step up lending at attractive rates to capture this new buyer interest and brokers equally to secure the best price, close the deal before regulation comes in and earn their commissions.
The only other hope is that the rental market also comes to heel, giving residents more options to suit their lifestyles and wallets.

 Ref: http://www.cpifinancial.net/blog/post/25144/a-real-estate-of-affairs