By Manoj Nair, Associate Editor www.gulfnews.com
Dubai: Property owners in Dubai who are keen to acquire another property in the city needn’t be too concerned about how to go about funding the purchase.
These days, more banks are willing to go more than halfway in meeting investor requirements where they use their existing properties as collateral. In other words, unlock the “current” value of their existing asset to finance their next one.
Investors would be better placed if they do not have any existing obligations on their existing properties. The generosity on the banks’ part has got to do with the way property values have been going up in Dubai. “When you have this kind of value gains on property, banks can lend on the existing asset through a top-up loan, which could then be used by the borrower as down-payment on a second property purchase,” said Niraj Masand, director at Banke M.E., the property services firm. “Under the current rules on mortgage lending caps, banks can offer up to 60 per cent for a second mortgage — this effectively limits such transactions to cash-rich buyers or investors.”
It is easy to see why this interests banks. They have collateral by way of the first property, while any new arrangement helps deepen their relationship with the property owner over a longer term. In Dubai, average property values were up 51 per cent last year, though the pace of growth has slackened since the start of this year, according to Cluttons data. Residential values expanded by 3 per cent in the first quarter after rising by nearly 6 per cent in Q4-2013, the Cluttons data finds. More info