Is it the end of speculators and over-leveraging in the UAE real estate market?

If Tamweel, the Islamic home mortgage company, figures are to be relied on then 90 per cent of home buyers in the UAE are end-users.

The Dubai Financial Market-listed company’s findings are based on analysis of home finance extended by it between January 2011 and June 2012.

Although average finance-to-value ratio stood at 80 per cent in 2008, Tamweel says the ratio currently stands at 75 per cent, indicating end-users are seeking to keep their leveraging to minimum.

“The past 18 months have witnessed a profound shift in the UAE home finance sector,” said Varun Sood, Acting Chief Executive Officer, Tamweel.

“Customers now are very savvy and will have thoroughly done their homework on both the property and the home finance product. Importantly, customers are no longer seeking to over-leverage themselves, and are instead fully prepared for significant equity participation, which is a very healthy characteristic of the UAE home finance sector today.”

However, Complete Limited, a global property firm that manages over 800 properties across 13 global markets, says loan-to-value ratio stood at around 70 per cent across the board, but raised for good cases. In the United States of America, 60 per cent is most likely to be the maximum.

The company claimed that local and international banks were ready to lend to investors from the Middle East who have a “good stable” income, thanks to the region’s perception as “safe haven”.

Chris Allen, Head of Mortgages, Complete Ltd, Dubai, said: “For those investing and hoping for an increase in value over the next few years, fixed rate mortgages are very popular, knowing that the interest rate cannot move for the following five years and that the rental income covers the mortgage is a huge feel good position for most buyers.”

Last week, Emirates 24/7 reported that increasing mortgage availability and low interest rates are boosting sale of completed units in Dubai.

“Buying homes in UAE may just have gotten more easier. Since early this year several top banks have cut interest rates in a bid to attract the real estate mortgage loans and that has had a positive impact on the Dubai real estate market,” Juma Ahmed Majid Al Ghurair, Managing Director of Al Manal Development, had told this website.

Property transactions jumped 21 per cent to Dh63 billion in the first half of 2012 compared to the same period last year in Dubai.

However, in 2011, the Dubai Land Department reported transactions worth Dh143 billion, with 60 per cent of the total transactions done through mortgage. It said this indicates the “recovery of the property financing and the return of healthy activities.”

An NCB Capital report has revealed that the mortgage markets in the six-nation Gulf Cooperation Council remains extremely underdeveloped by global standards.

In the UAE, it was only four per cent in 2005, but is estimated to have surged to around 14 per cent in 2009, while Kuwait and Qatar stood at around 14 and nine per cent, respectively. In Saudi Arabia, it is only around one to three per cent, while in Bahrain it is estimated at 4.5 per cent.