Banks need to relax their lending criteria for prospective mid-range homeowners in order to "get the economy moving again", according to a property developer.
Mohammed Nimer, CEO of MAG Group Property Development, which is involved in Dh3 billion of developments in the UAE, said prospective owner-occupiers in the mid-price range make up the backbone of the workforce but most are unable to raise mortgages at affordable entry levels in the restricted credit market.
"These aspiring homeowners constitute thousands of white collar workers in both public and private sectors and if they feel that they don't have a long-term future in the country, they may well not be around when the upturn arrives," he added.
A survey conducted on behalf of MAG Group underlined the problem caused by restricting credit to potential homeowners, revealing that in some cases it would be cheaper to buy than rent property. The survey of major real estate players found the average rental price for a two-bedroom apartment in Dubai Marina at Dh185,000 per annum. The purchase price of a similar apartment is Dh2.3 million – the equivalent of Dh176,000 per annum on a 90 per cent interest-only, 20-year mortgage at 8.5 per cent a year.
"Most of the main mortgage providers are demanding excessive deposits up-front even though property prices have softened. In most cases a minimum of 50 per cent of the purchase price is required – which means a prospective buyer needs to find in excess of Dh1m as a deposit. That is a virtual impossibility for most," said Nimer.