Abu Dhabi: High mortgage rates are the biggest obstacle to a housing recovery in Abu Dhabi, where property prices have fallen more than 30 per cent from their peak, the emirate's second-biggest developer said.
"We have so much demand, but interest rates are still very high," Abu Bakr Seddiq Al Khouri, managing director of Sorouh Real Estate Co, said in an interview. "If corrected, it would help the sector tremendously."
Sorouh received 500 inquiries about apartment purchases in two weeks after it offered a lower-than-average interest rate of 4.99 per cent for two years to buyers in its 64-storey Sun Tower, Al Khouri said. Eleven said they want to buy, he said.
The tower includes 684 apartments to be completed in the middle of this year.
Property prices in Abu Dhabi have dropped 33 per cent since September 2008, according to CB Richard Ellis Group Inc. Values fell even though the country has a shortage of about 30,000 homes, Majid Azzam, a real-estate analyst at Al Futtaim HC Securities said in an interview.
"We have all the fundamentals if you compare us to other places in the world," Al Khouri said on April 13. "We have the demand and a supply shortage. A big portion of the population is just starting to own property."
Buyers' decisions
Mortgage rates are more important to Abu Dhabi's housing market now because the type of buyer has changed since the credit crisis, Azzam said.
"Before, buyers were not deterred by high interest rates because they were mostly speculators who bought to flip as prices appreciated rapidly," he said.
"However, as demand is dominated now by end-users, factors such as interest rates and rental yield weigh heavily on the buyers' decisions."
Abu Dhabi's government has been helping developers push rates down "as much as possible," Al Khouri said.
