Dubai housing slump

Up to 40% of approved Dubai home loans snubbed...

The number of buyers in Dubai who have been pre-approved by lenders for mortgages and subsequently decided to abandon purchasing a property is as high as 40 percent, a Dubai-based finance company has told Arabian Business.

Earlier this week, Colliers International's Dubai House Price Index found that quarterly house prices in the emirate fell by one percent in the fourth quarter of 2009 and by 42 percent year-on-year since compared to Q4 2008.

As part of the report, Colliers also found that mortgage transaction in Q4 declined by 15 percent.

"Anecdotally we have learnt that the announcement of the Dubai World debt restructuring has influenced purchaser sentiment," Ian Albert, regional director at Colliers International said at the time.

Albert told Arabian Business that after the Dubai World announcement on November 25 "anecdotally we heard from banks that people who had been pre-approved for mortgages to buy then decided not to. However, that is only anecdotally and is not supported by data."

A senior consultant from Independent Finance, which advises Dubai buyers on their mortgage and finance needs, said that this was still the case.

He added that the number of buyers who gain pre-approval on loans and then decide to abandon buying a property was currently as high as 40 percent.

"It is quite a lot of our clients who get pre-approvals who do not go ahead with it," the consultant said, putting the figure as high as around 40 percent.

The main reason for the cancellation of deals, he said, was that documents often take two to three months to come from developers and the buyers then look at the market and change their mind about pursuing the deal.

"They have seen the prices drop and see a change in the market and decide no."

Lending is often available for those who qualify for it but the buyer confidence is not there to take advantage of it, he added.

"From the banks' perspective they are not trying to chase clients away they are actually pushing us quite hard to get them new clients.

"Finance is out there. There are a number of banks not lending but those who are lending are actually quite aggressive. Their terms are tighter than they were before but they are still lending actively and offering the facilities," added the consultant.

The comments come on the back of official data from the Dubai Land Department that showed that the Dubai mortgage market slumped by 73 percent last year.

Earlier this week, Arabian Business reported that Palm Jumeirah had also seen the first repossession by a bank when an apartment was sold for 35 percent below its market value.

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