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6-Star-Hotel-Burj-DubaiDubai Islamic mortgage lender Tamweel has ended its two year moratorium on new lending this week, after Dubai Islamic Bank (DIB) stepped in with a bailout, which increased its stake in Tamweel from about 21 per cent to 57.3 per cent.

While its rates are competitive they are not going to be the best, and the effect of their re-entry to the market is expected to be limited, not least because we don’t know as yet how strict the bank’s lending criteria will be.

“We are not sure if there are hidden qualification factors that will prevent many potential buyers from being able to secure a mortgage with Tamweel,” said James Gauduchon, the manager of corporate marketing at Better Homes, a property brokerage in Dubai.

Rates wise it seems that Tamweel are only just competitive when we look around the market. The bank’s is to charge 7.4 percent per year, plus between 0.5 and 1.5 percentage points based on customers’ income levels and other factors. On top of that the bank is to charging 1% processing fee on 25 year Islamic mortgages. Customers can borrow a maximum of Dh5 million (US$1.3m) to buy up to two properties.

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Dubai-based Tamweel, the largest provider of real estate finance in the UAE, yesterday received the license from Egypt’s Mortgage Finance Authority (MFA) to start operation in the Arab world’s most populous nation.

Tamweel is expanding its geographic reach outside the borders of its home market as it implements its regional leadership strategy. The Egyptian firm, a fully-owned subsidiary of Tamweel, is expected to begin operations in the second quarter of this year with an authorized capital of £500 million (Dh334.55m) and an issued capital of £100m.

The US sub-prime crisis continues to take it’s toll amongst developers and recent announcements from a variety of sources don’t seem to see any let up on the horizon. Some recent announcements this month include:

Toll Brothers Inc.(sic) said that its fiscal first-quarter home-building revenue fell 22% from year-earlier levels to $842.7 million and it doesn’t see any end in sight to housing-market woes. The company said it is still finalizing its first-quarter impairment analysis, but expects pretax write-downs of between $150 million and $300 million. “The housing market remains very weak in most areas. Based on current traffic and deposits, we are not yet seeing much light at the end of the tunnel,” said Robert Toll, the firm’s chairman and CEO. Toll will report full first-quarter results on February 27th.

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If mortgage approvals are any bench mark, Hong Kong’s already fast paced economy is about to get another shot in the arm. Approvals last month reached their highest level in ten years. This November, saw a rise of 76% over last year’s new mortgages, lending over $3 billion US.

It pays to plan ahead if you’re buying overseas. Stephen Pritchard tells you how

For some holidaymakers, browsing estate agents’ windows is as much part of a break as soaking up the sun or touring the cultural attractions of a foreign city. But a growing number of people go further, and put in an offer to buy an overseas property.

Just under a third of Britons are interested in owning a property abroad. A fifth of all remortgages taken out in the UK are in order to fund an overseas property. Often though, would-be buyers do not consider the finances until they have already put down an offer. This can leave buyers struggling with two problems: arranging the right type of mortgage, in the right currency, and transferring what can be a substantial lump sum overseas for the deposit.

In many overseas markets property transactions take significantly longer than in the UK, so any delay in organising the finances could put the purchase at risk. “Usually buyers have not thought about the timescale or the length of the process,” says Neil Burns of mortgage brokers Mortgage Maestro. “They might have dealt with lenders in the UK where you can submit an electronic application in minutes. In Spain or Portugal you need to allow 10 to 14 weeks.”

Ideally, anyone looking to buy an overseas property should take independent financial advice. Lenders in continental Europe often require substantial deposits: 30 per cent is common. Mortgage terms are usually shorter, too. As a result of the complexities of raising finance abroad, UK home owners buying properties overseas often do so in cash, or by remortgaging their UK property.

Remortgaging here is straightforward enough, at least for buyers who have sufficient equity in their home. But it brings two risks: they could lose their UK property should they fail to meet the new, higher mortgage repayments. And the finance is only available in pounds sterling.

For some buyers, a mortgage in the local currency they are buying in makes sense; in other cases the best way to finance a property could well be in a third currency. Some buyers in Cyprus, for example, are currently arranging mortgages in Swiss francs with Cyprus banks, in order to take advantage of the lower Swiss franc interest rates.

Whether such an approach makes sense, cautions Burns, depends on the buyer’s attitude to risk and how flexible their finances are. For someone with a large overseas mortgage and most, if not all, of their income in sterling, a mortgage in euros or another local currency brings with it exposure to fluctuations in the money market.

One area where it does make sense to think in local currency terms is the deposit and any transaction fees. By being prepared to convert money into the purchase currency ahead of time, buyers can increase the chances that exchange rates will work in their favour. The simplest option is to open a savings account with a local bank or a UK or offshore bank that operates foreign currency accounts.

Citibank offers its UK customers US dollar and euro savings accounts, and offshore branches of banks such as HSBC and Barclays have similar deals. Unfortunately interest rates, especially on euro savings accounts, are low.

As an alternative, a growing number of overseas property buyers are turning to foreign currency brokers, who can book currency ahead on the money markets, known as a forward contract. Foreign Currency Direct, for example, can reserve funds for up to three months. This has the advantage of fixing the exchange rate, but the funds can stay in a sterling account until the last possible moment.

According to Foreign Currency Direct director Robin Haynes, currency brokers can often achieve a far better rate of exchange than using a bank, especially for larger transactions. The exact savings will depend on how good the property buyer’s UK bank is: Haynes expects to save 0.5 to one per cent over a good bank commercial rate, but if the UK bank is only offering “tourist” rates, the saving could be as high as three to four per cent.

“In one case we managed to save a client US$30,000 on a dollar purchase,” says Haynes. “That could easily be enough to buy a swimming pool.”
Source: The Independent Online

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DUBAI – With interest rates going up in the international markets and the US Federal Reserve indicating further tightening in the months to come, the cost of mortgage finance is increasing in the UAE, according to industry sources.

Mohammed Al Hashimi, Chief Executive Officer of Amlak Finance, told Khaleej Times while local mortgage companies have absorbed some of the recent increases in rates, eventually any increase in global rates will be passed on to customers.

The US Federal Reserve has recently raised short-term interest rates for the 11th time since June 2004 and analysts are forecasting one more hike for the remaining part of the year, he said.

He said the local mortgage market would expand further when developers start delivery of residential units, which are currently under construction and get all the payments. A maturing market, in turn, will lead to more competitive pricing and that is expected to fuel further growth, he explained.

Al Hashimi also said more sukuks needed to come to the market as there is significant liquidity, especially among institutional investors and lesser opportunities compared to traditional investment products. There is also need for better regulatory framework so that sukuks as an asset class can support more diverse products to meet the requirements of the market.

He said the local market was enormous and could support more players in mortgage business. However, banks are still slow and reluctant to enter the market, he added. He played down the possibility of the Dubai property market collapse, saying that the market was still strong, has scope to grow and of late has become more stable.

He said: “Our economy is built upon a solid growth. I keep hearing about the bubble burst, but all these talks are baseless.”

In fact, the market has stabilised, with speculators withdrawing from the business and concentrating on the stock markets instead. “Now we have more serious buyers and end-users in the market than before,” he said.

He also dismissed rumours that less transactions are taking place in the market and that premiums have fallen, saying that ready for possession properties still command 15 to 20 per cent premium.

Source: Khaleej Times

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Turkeys State Minister and Deputy Prime Minister, Abdullatif Sener, has said a bill regulating the implementation of Turkeys new mortgage system is top priority on the agenda for the 2006 parliamentary year. So within months investors will soon be able to take out a conventional mortgage for up to 30 years to finance their property purchase in Turkey.

Currently, Turkish banks offer only short-term loans, limiting the number of mortgages that can be granted. This has somewhat limited the real estate economy in Turkey today. However the reduction of extremely high levels of inflation through a floating foreign exchange regime and tight monetary policy have led to improvements in Turkeys economic conditions. The countrys high interest rates have, in turn, fallen from around 24% at the end of 2004 to an encouraging 13% at the end of 2005.

Turkey has a huge population of just over 70 million which expands by 2 per cent each year and while 70 per cent of the population is younger than 30 years of age, there is a strong demand for property in Turkey. The new mortgage facilities will boost the Turkish property market to great new levels and we expect to see a dramatic increase in property construction in general, including holiday homes. With over 25 million tourists visiting Turkey each year, the new legislation will undoubtedly encourage further growth in tourism and create some encouraging new buy-to-let opportunities.

Turkey boasts some stunning mountain and coastal scenery as well as a rich and exciting culture, making it a top worldwide tourist destination. Added to this, the current economic climate in Turkey is strong and actively favours foreign investment in the property market, while most experts predict it is now sitting on the brink of a property boom. The introduction of the Turkish mortgage will prove invaluable to finance purchases in numerous new developments currently under construction in prime beach-front locations – it seems there has never been a better time to buy into this growing property investment market.

Finally, with Turkeys EU accession due sooner rather than later, the Turkish mortgage will go a long way to bring Turkey into line with the standards and practices expected from worldwide property purchasers. We believe the results will prove very inspiring to our investors.

Source: Property Showroom

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Investors buying property overseas should take heed of recent currency exchange rate swings in the US and Turkey, warns Assetz, and recognise the value of using overseas mortgages.

In the US the value of the US dollar has fallen from $1.75 in April to $1.88 to £1 Sterling, which equates to about a 7 per cent loss of capital for British investors who bought there for cash or remortgaged their UK home in order to buy, last year.

However, those who took out an American mortgage will see the Sterling value of their debt falling by the same amount, reducing their loss to just 7 per cent of their deposit.

Similarly, over the last month the value of Turkish Lira has fallen from approximately 236,000 to almost 300,000 Lira to £1 sterling.

This severe currency shift means that those investors who purchased property up to March 2006 with Turkish Lira could now find themselves with a capital loss in the region of 20 per cent.

Mortgages are not currently available in Turkey but are expected to be announced imminently, and will no doubt be a popular choice with new investors who now find themselves with about 20 per cent more buying power.

“Those looking to invest in the US and Turkey can learn a valuable lesson in the benefit of using foreign mortgages in the country where they are buying,” said Stuart Law, managing director of Assetz.

“If both the property and its mortgage are priced in the same currency, this will minimise the risk to the investor from capital loss.

“Even if a local currency mortgage was used it should be noted that the deposit on the property would still be at risk, which reinforces the general overseas property investment trend to buy with minimum equity in Pounds Sterling.”

Although Turkish property appreciated by around 30 per cent in 2005, the effect of the currency shift could severely reduce this gain if it feeds into property prices.

While coastal Turkish property is priced in Euros, much of the rest is priced in Turkish Lira and those purchasers from last year or before could have lost around 20 per cent in the last few months.

Equally, buyers today paying in Turkish Lira will be getting 20 per cent or so better value.

US house prices rose by about 12 per cent over the last 12 months and much of this gain would have been wiped out by the recent currency shift between US Dollars and Sterling.

Investors buying in the US today are enjoying better value than those from a few months ago.

Mr Law added: “Currency shifts are not a reason to avoid investing abroad, but their effects upon investment returns certainly need to be better understood.”

Source: 999 Today

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From Bordeaux to Barcelona and Budapest to Bulgaria, British holidaymakers in their thousands are falling for foreign second homes.

Buying abroad has gained momentum in recent years, as homeowners dream of retiring in the sun or investing in countries with profit potential. An estimated 250,000 Britons own a property outside the UK.

But while finding the right property at the right price might be relatively easy, how should you pay for it? Many people simply tap into savings or remortgage their first home and pay cash up front. This is by far the cheapest and simplest method if you have equity in your current home in Britain, as long as you bear in mind currency conversion costs. Since large deposits are often required on purchases – sometimes up to 40 per cent – buyers could remortgage to pay this and then take out a loan for the balance.

But if you want to take out a mortgage in the country where you are buying, how do you go about it? Several UK lenders provide loans on overseas properties through their international divisions. They include Halifax, HSBC, Lloyds TSB, Royal Bank of Scotland, Woolwich, and building societies Leeds and Norwich and Peterborough.

Some of these lend only in sterling, while others will lend in the currency of the country if you prefer. Most specialise in key eurozone countries such as France and Spain.

Conti Financial Services, a specialist adviser on arranging foreign mortgages, tells borrowers to take out a mortgage in the currency in which they earn their main income. Simon Conn, managing director, says: ‘Most clients should borrow in the currency they are earning, but those who buy properties in popular countries like Spain and Portugal and then rent them out tend to arrange their mortgage in euros. This is so they can offset their euro rental income against the loan repayments.’

A further attraction of euro loans especially is that they are significantly cheaper than sterling deals. Conn says: ‘Interest rates are typically 2.5 percentage points less at the moment.’

Among the deals available through Conti, borrowers can get a euro loan for as low as 3.4 per cent in Portugal, although this is for higher values of loan and there are redemption penalties attached.

But Conn warns borrowers who take a foreign currency mortgage to consider how currency fluctuations can affect their repayments. He says: ‘Exchange rate movements may increase the sterling equivalent of your liability under a foreign currency mortgage.’

Other details to ponder include the minimum purchase amounts – €100,000 in Spain, for example – and how lenders determine how much you can borrow. Most lenders in popular destinations consider affordability based on a set calculation. In Spain they will take your net income, calculate 35 per cent of this, deduct other liabilities such as your UK mortgage repayments, then use what is left to calculate what you can borrow. The self-employed are likely to face more stringent calculations.

Borrowers are also likely to face tighter limits on the maximum loan to value. In France, the cap might be as low as 60 per cent (although it can go as high as 80 per cent), and if the home is uninhabitable and needs renovation the terms will be even tighter.

Unlike in the UK, if you are purchasing a buy-to-let property in France lenders will ignore the rental income when considering your application and expect your own income to cover repayments. You will also need life insurance to back a loan, although sometimes this is included in the deal for a first-time borrower.

In Portugal you will find that the loan will be agreed on the valuation price and not the purchase price. Conti warns borrowers to check all the extra costs involved, as lenders charge arrangement fees. A French lender probably will not arrange surveys, unlike in the UK, and you should think about organising one yourself.

Ray Boulger of London-based mortgage broker Charcol, which deals with both Conti and expatriate finance specialist Blevins Franks when clients want to buy abroad, warns of other pitfalls. ‘The legal arrangements are very different and then there is the language issue. Never sign a contract that you do not understand. Buyers who are in the position to buy with cash should also take care not to rush in and save on legal costs simply because they are not using a mortgage. They should get a local solicitor and arrange a survey. It may cost money but it will be worth it. They need to be sure they have legal ownership of the property and that the properties have been built legally. Another issue in Spain is that you can buy a property with someone else’s debt on it – check this carefully.’

Source: The Observer