Ask any Dubai property agent, and he’ll tell you that the going’s getting good once again. There are more transactions happening, he might tell you, which obviously means that the once-missing confidence is returning to the market.
The latest report from property consultancy CB Richard Ellis (CBRE) yesterday showed that total transactions in the Dubai market hit Dh4 billion in the quarter ended June 2012, compared with Dh3.1bn worth of deals concluded in the first quarter of this year.
Citing data sourced from Dubai Land Department, CBRE said total residential transactions grew 15 per cent to 3,165 in the second quarter compared to 2,745 in the first quarter of 2012.
Earlier last week, Jones Lang LaSalle (JLL), another real estate brokerage, said the growth in Dubai’s property market was evident even if not inclusive. “Dubai is on a selective growth track, some parts are growing – like in prime areas – but it’s too early to say the whole market is growing and whether this growth is sustainable given the ongoing supply,” said JLL’s Craig Plumb.
Unsurprisingly, Emaar Properties, the UAE’s largest real estate company, believes that, after a handful of years of decline, the Dubai market has shown conclusive signs of a turnaround. “The sell-out response to Panorama at The Views is a clear testament to investor confidence in… the positive growth being recorded by Dubai’s property sector this year,” Ahmad Al Matrooshi, Managing Director, Emaar Properties, said in an emailed statement to Emirates 24l7 in May this year.
This would all mean that many more customers and fence-sitters are finally making the move and, logically, would be knocking on the banks’ doors to source mortgages for their new homes.
Not really, it seems.
More money was returned by UAE customers to local banks in old mortgages than it was taken out in new property loans, according to UAE Central Bank’s latest Monthly Statistical Bulletin for March 2012.
According to Central Bank data, real estate mortgage loans doled out by UAE banks have, in fact, declined over year-end 2011, from Dh161.53 billion as of December 2011, to Dh160.87 billion as of March 2012.
In fact, despite the all-time low interest rates charged by some UAE banks (3.95 per cent per annum), mortgage off-take has remained sluggish at best in the past 18 months. Mortgages by UAE banks totalled Dh163.18 billion as of December 2010, and have since declined by about Dh3 billion.
So if banks are not funding the real estate revival this time around, then how are transactions happening?
Cash is king once again, it seems.
According to Dubai Land Department, overall property sales in the emirate for the first quarter totalled Dh22.34 billion, with cash accounting for 68 per cent, or Dh15.23 billion, of the total sales.
As was reported by this website, over 6,600 units valued at Dh8.4 billion were purchased in cash during the first quarter of 2012, with only 1,256 units, worth Dh1.99 billion, being mortgage deals, citing Dubai Land Department data.