HSBC is set to help home-buyers in Dubai, one of the hardest hit real estate markets in the world, as property prices here have plunged by more than 60% from their peak.
The bank has reduced interest rates on 25 year mortgage by 76 basis points to 5.49% and has also eased up on LTV ratios.
House price growth is needed to help restore demand, and although this doesn’t need to be substantial, it does need to return to something approaching a normal market.
HSBC is now prepared to lend up to 80% of the property’s value to house buyers, up from 70%, although the LTV ratio for apartment buyers remains at 70% due to increased supply which is expected to put pressure on prices into next year.
Mortgage lending came to a standstill in Dubai during the global crisis, and two of the biggest mortgage providers halted lending for nearly 2 years.
During the boom years speculators frequently bought off-plan and sold for a profit before building had even begun. Nowadays the majority of loans are for completed properties built within developments that have a proper infrastructure and facilities.
London based analysts feels the market has some way to go before recovering. Some even take the bleak view that house prices could fall by another 10% to 15% during the next twelve months although the banks are offering more mortgage products at better rates.
Jones Lang LaSalle estimates that another 54,000 homes will come onto the market between now and 2015, which is around 15% to 20% of existing supply.