An interesting research project, for an underworked consultancy, would be to find out how many times the word ‘mortgage’ has appeared in news headlines around the world, in the last 12 months.
Reported figures could be broken down by crisis zone, or currency, or perhaps just proximity to the word ‘crisis’. Results would not only reveal the hot-spots of the world’s financial woes, but may also tell a tale or two about reaction within them.
While headlines in the US tell of Bank of America’s $11 billion-plus pay out to Fannie Mae – plus a host of other punitive money shuffling – adding up to some $20 billion, here in the Middle East 50% is the figure doing the rounds.
This is thanks to the UAE central bank’s recent declaration, capping the total value of expat mortgages at half the value of the property in question, at the same time doubling, or tripling, the typical deposit requirements for buyers.
Reaction has been mixed. Most people recognise the intent behind the move: keep the market steady and avoid a repeat of an over-heated property bubble. The flipside is the fear that the new ruling will depress a slowly improving residential market.
Experts and analysts have weighed in with a selection of educated guess work, but until the bank’s circular is clarified, including the level of compulsion, uncertainty will be the order of the day. So, if you had hoped that 2013 would mark the end of turmoil, it already looks like you may be out of luck.
While this may not immediately shake the world of the contractors, developers must take note. There’s not much they can do until details are finalised and widely understood, but by any measure, a cap of 50% seems drastic.
Yes, there is a need for sensible talk about debt management in the region. And yes, plenty of people in the UAE owe too much. But a 50% deposit to buy a property is a fair bit by any standard and may well hinder the gentle hints of recovery spotted recently.
It also has the potential to encourage the development of dubious workarounds. If
new rules are too restrictive, the overtly entrepreneurial may be all too quick to find a way to subvert the stabilising intent of the cap. This is the last thing anyone needs.
If a compulsory cap is to be in place, it needs to be at a level that does not stifle recovery and keeps developers selling properties, so they will keep generating more contracts. Let’s hope that’s what the market in the UAE ends up with.
Apology: P23 of Construction Week #448 incorrectly identified Hill International as being engaged in work on the New Doha International Airport and the Al Maktoum International Airport. We apologise for the error and any confusion it may have caused.
Debt management
Talk of mortgages is dominating the headlines as changes are afoot
RELATED ARTICLES: Site Visit: Hodariyat Bridge l Face to face: Hamad Al-Shagawi l Construction Week Awards Oman
An interesting research project, for an underworked consultancy, would be to find out how many times the word ‘mortgage’ has appeared in news headlines around the world, in the last 12 months.
Reported figures could be broken down by crisis zone, or currency, or perhaps just proximity to the word ‘crisis’. Results would not only reveal the hot-spots of the world’s financial woes, but may also tell a tale or two about reaction within them.
While headlines in the US tell of Bank of America’s $11 billion-plus pay out to Fannie Mae – plus a host of other punitive money shuffling – adding up to some $20 billion, here in the Middle East 50% is the figure doing the rounds.
This is thanks to the UAE central bank’s recent declaration, capping the total value of expat mortgages at half the value of the property in question, at the same time doubling, or tripling, the typical deposit requirements for buyers.
Reaction has been mixed. Most people recognise the intent behind the move: keep the market steady and avoid a repeat of an over-heated property bubble. The flipside is the fear that the new ruling will depress a slowly improving residential market.
Experts and analysts have weighed in with a selection of educated guess work, but until the bank’s circular is clarified, including the level of compulsion, uncertainty will be the order of the day. So, if you had hoped that 2013 would mark the end of turmoil, it already looks like you may be out of luck.
While this may not immediately shake the world of the contractors, developers must take note. There’s not much they can do until details are finalised and widely understood, but by any measure, a cap of 50% seems drastic.
Yes, there is a need for sensible talk about debt management in the region. And yes, plenty of people in the UAE owe too much. But a 50% deposit to buy a property is a fair bit by any standard and may well hinder the gentle hints of recovery spotted recently.
It also has the potential to encourage the development of dubious workarounds. If
new rules are too restrictive, the overtly entrepreneurial may be all too quick to find a way to subvert the stabilising intent of the cap. This is the last thing anyone needs.
If a compulsory cap is to be in place, it needs to be at a level that does not stifle recovery and keeps developers selling properties, so they will keep generating more contracts. Let’s hope that’s what the market in the UAE ends up with.
Apology: P23 of Construction Week #448 incorrectly identified Hill International as being engaged in work on the New Doha International Airport and the Al Maktoum International Airport. We apologise for the error and any confusion it may have caused.
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