What you should do in property market today

With property values depressed and some great bargain deals available in today’s market, a number of tenants are asking themselves the same question: “Should I continue to rent or is it time to buy?” The most important factor to be considered before purchasing a house is the availability of finance, but with new mortgage rates being slashed, cheaper finance would seem to be readily available for qualifying customers. 

The devil, say experts, is in the detail. “Common wisdom holds that in the long term, it is always better to buy a home than to rent. However, it’s not really what makes more sense as for anybody, an investment such as property is beneficial as long as it’s affordable - the only issue is that banks are not really lending the needed amount to enable people to purchase property,” Laura Adams, Manager - Residential Sales and Leasing Manager at Better Homes, told Emirates24|7.

While a a number of banks have reduced their mortgage rates and some are offering as low as 4.99 on new loans, most are asking for a very high loan-to-value ratio, i.e., a 30 to 50 per cent down payment of the property value. According to Lloyds TSB, it offers a rate of 5.49 per cent for villas and 5.99 per cent for apartments, with an LTV ratio of 50 per cent.

Banks maintain their lending approach remains the same as it was during the boom time. “Our approach to mortgage lending remains as it was in 2007; we have always been a relationship bank and as such we assist our customers in their home purchases by making lending decisions based on knowledge of our customers and their individual financial circumstances. Thorough income and expenditure analysis ensures customers do not over-extend the amount they borrow and can afford to pay back,” Richard Musty, Managing Director, Lloyds TSB Middle East, said.

According to Musty, the change that has happened in the mortgage market is one that is of more choice. “A development from 2007 is that there is more choice now in terms of the types of mortgages on offer by lenders. We constantly review and monitor the market and keep our product offering in line with the developments. We seek independent valuations on property we lend against,” he said.

Commenting on consumer sentiment, the Lloyds expert said: “In terms of the wider property market position now, from the reports I have seen, experts are predicting an increased level of stability in property prices in 2011. There are likely to be further dips but overall there will be a more favourable position than we have seen in 2010.

“We have seen an increase in enquiries for mortgages suggesting that there is a more positive outlook towards mortgages in the market and increased buyer confidence,” he added.

“I would like to see banks lend more,” says a prospective homebuyer. “I want to buy a villa but its better in the long-term that the bank lends me what I can repay. We should not forget what over-lending did to the market,” he said.

Besides the easy availability of finance, there are many other factors to be considered before buying a home, say experts. “Whether renting is better than buying depends on many factors, particularly on how fast prices and rents rise and how long you stay in your home. While renting relieves you of the hassle of maintaining and repairing the structure and offers the flexibility of lower monthly payments, enabling one to save more for a down payment for an eventual purchase, owning offers an opportunity to build equity and receive capital returns,” elaborated Adams.

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