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 The Abu Dhabi real estate sector is showing remarkable resilience to the global financial crisis.
Chris Allen, head of operations – mortgages at Hamptons International, attributes this to the strong
economic fundamentals of the Emirate. He shared some insights on the mortgage sector in Abu
Dhabi with us
ADW: What is the status of the mortgage market in Abu Dhabi? Are mortgages easier to obtain here than in Dubai?
The mortgage market in Abu Dhabi is evolving in line with the development of the property sector in the Emirate. The real estate market in Abu Dhabi had a relatively slower start, compared to Dubai.
Currently, with several landmark projects and the overall growth of the Emirate’s economy, Abu Dhabi has strengthened considerably. It is still regarded as a good option for regional and international investors.
The mortgage market has also evolved simultaneously. In fact, Abu Dhabi Finance, the latest home finance provider, is offering mortgages with a wide range of benefits including loan to- value ratios of up to 85 percent, loan terms between three and 30 years, flexible payment options and debt service ratios of up to 55 percent.
ADW: Is mortgage regulation in Abu Dhabi strong enough to protect the interests of the customers and developers?
Abu Dhabi has always approached the real estate and mortgage market on the basis of clearly laid out guidelines. This is important for the long-term benefits of both customers and developers.
ADW: A report by EFG Hermes last year said the “bulk of property deals in the UAE have been equity financed and mortgage borrowing usually associated with property in more mature markets has not just been present.” Do you consider this a positive step, given that indiscriminate lending has led to the subprime crisis in the US?
The UAE Central Bank says the majority of property purchased in the UAE is bought with mortgages. However, the critical difference between the indiscriminate lending that led to the subprime crisis and the UAE model is the due diligence procedures undertaken by mortgage providers. Given the overall liquidity crunch, it would be far too optimistic to expect mortgage providers to be extremely generous, and the checks and controls that have been in place is one reason for the region’s comparative resilience to the global financial crisis.
ADW: Are mortgages easier to obtain on commercial properties in Abu Dhabi?
The mortgage market does not show any skewing in favour of the residential or commercial sector. Ultimately, it is the financial status of the customer that matters. Abu Dhabi today has several attractive commercial investment options, and mortgage providers are offering attractive options for customers.
ADW: What are the changes that you would like to see in the Abu Dhabi mortgage sector?
The proposed draft laws on real estate bank guarantees and mortgages are expected to further strengthen the mortgage sector. Clearly laid out guidelines also play a crucial role in the market.
ADW: What is your evaluation of the Abu Dhabi property sector? How soon can it overcome the current challenges?
Abu Dhabi has shown considerable resilience to the global financial crisis and liquidity crunch. This has been led in particular by the government’s focus on infrastructure development and continued investments in landmark projects. In turn, this has strengthened market confidence and supports customer demand. The long-term planning of Abu Dhabi, as envisaged in the Strategic Plan 2030, is another indicator of the sustainability of the Abu Dhabi growth model. The property sector does gain growth impetus from other traditional economic sectors. Abu Dhabi continues to have a buoyant oil and gas sector, which is the largest contributor to the Emirate’s GDP . The Emirate has also taken several initiatives to boost tourism. This will in turn reflect positively on the property market.
[caption] Chris Allen has over 15 years of experience and expertise working in the UAE property sector, with two decades of prior experience in mortgage financing in the UK. He is a fully qualified Independent Financial Adviser (IFA) and a member of the Institute of Marketing..
property LINE
Aldar boost for middle market
Aldar Properties , the largest real estate developer in Abu Dhabi, is launching a AED9.4 billion mid-income housing project for mid-income buyers … thanks to Government backing.
The Al Falah project will be fully funded by the Abu Dhabi government and would be delivered in stages starting from 2011 to 2014.
“This project signals the emphasis we will place this year and in 2010 on building more mid-income housing projects because there is a requirement for it from UAE nationals,” explains Aldar Chairman Ahmed al-Sayegh. A section will be made available for expatriates, he added.
Abu Dhabi is facing a housing shortage that has driven up rents and stoked inflation as an oil price boom attracted expatriates faster than new homes could be built, but inflationary pressures have subsided since the global economic crisis spread and hit oil prices.
The project will comprise 5,000 homes for mid-income UAE families who will be given the residences free of cost, as well as schools, mosques, office space, a retail mall and hospital.
[Originally published in Abu Dhabi Week vol 2 issue 15]
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