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Affordable house prices are key for better mortgage industry

Oil has been blamed for the rising property prices in the region

  • By Nicole Walter, Senior Reporter
  • Published: 00:00 June 3, 2010
  • Gulf News

Dubai: The creation of a mortgage summit, experts agree, is essential to driving the region's housing market. It is hoped that this will lower prices and make houses more affordable.

Dubai has a $66 billion mortgage market, but this number won't rise unless property and mortgage lending becomes more affordable.

"Current prices are not affordable or realistic, and further falls are necessary and then economic fundamentals will start rebuilding market confidence," said Khalid Hamad the Central Bank of Bahrain Executive Director of Banking Supervision, at the GCC Mortgage Summit in Bahrain.

Oil has been blamed as the culprit for driving property prices in the region up too quickly, ultimately creating a bubble.

Inflation

Salaries have not kept up with inflation and today are not enough to afford a mortgage for most in Bahrain.

"Around 80 per cent of Bahrain nationals earn less than 1,200 dinars [Dh11,635] per month, and with local mortgages at 9.25 per cent there is no way for this group to pay a large mortgage," Sameer Abdi, Ernst & Young's Head of the Islamic Financial Services Group in Bahrain, said. The rate would need to fall at least by three per cent and prices need to come down to enable buyers to get their own home, he added.

In Dubai mortgage rates now average 6.75 to 7 per cent, but Jean-Luc Desbois, managing director at Home Matters mortgage consultancy, told Gulf News the rates should preferably come down to 6 per cent by year-end.

"Interest rates are moving in the right direction, but the pace is slower than those of deposit rates coming down. Lower interest rates would certainly engage and increase the buyers appetite to come to the market."

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