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