An increase in customer inquiries about buying property in Dubai has led Lloyds TSB Middle East to expand its mortgage offerings, a top executive says.
Lloyds TSB Middle East, a division of the second-largest UK bank, was among the first to cut back lending to property buyers as the financial crisis hit Dubai in late 2008. Until now, it has restricted its loans to 50 per cent of the price and limited properties to villas.
Richard Musty, the country manager for Lloyds, said yesterday the UAE's economy would grow by 2.5 per cent this year as oil prices remained strong. Dubai's GDP would grow by about 1 per cent.
"The economy is feeling better but I think it will be testing as we go into 2011 and 2012," Mr Musty said.
Customer inquiries had shot up near the end of last year and this year, which convinced Lloyds to widen its offerings.
The bank yesterday unveiled mortgages that start at 5.49 per cent, depending on the property type. It will only lend for certain properties, such as the Shoreline apartments on the Palm Jumeirah, Old Town in Downtown Burj Khalifa, Arabian Ranches and The Greens.
The new offerings also allow for a 20 per cent early repayment each year without penalties for the first two years of the mortgages to be more flexible to customers, Mr Musty said.
Lloyds requires mortgage applicants to open an account at the bank so it can fully analyse their ability to make their payments, he said.
"We're a responsible lender," Mr Musty said. "What that really means is we sit down with customers, we look at income, expenditure, assets and liabilities.
"If they want to borrow money, we will lend money on that basis. There is no lending for speculative investment."
Mortgage providers are pushing back into the market with new offerings to take advantage of what analysts say are the "stabilising" of prices in Dubai in sought-after areas.
Tamweel, which froze lending for two years starting in November 2008, this week unveiled a programme to offer loans with a 4.99 per cent interest rate on some properties.
Varun Sood, the acting chief executive of Tamweel, said earlier: "There are now clear signs of increasing confidence in the country's property market … while real estate prices have fallen in recent years, the trend in most mature developments is towards stabilisation.
"Demand is increasing among end users and this a very positive trend for the market."
Prices in Dubai declined by 2.4 per cent for apartments and 5.1 per cent for villas in the final three months of last year compared with the same period in 2009, the consultancy Cluttons said in a report released on Sunday.
The more established "lifestyle" areas, such as Old Town, Dubai Marina, Palm Jumeirah, The Meadows and The Greens were proving more resilient in sale prices and rents, Cluttons said.
Mr Musty would not comment on the outlook for property prices but said the bank maintained relationships with developers and regulators to monitor the state of the property market.
The bank is 43 per cent owned by the UK government, which bailed it out in 2009 during the financial crisis.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Brief scores:
Manchester United 4
Young 13', Mata 28', Lukaku 42', Rashford 82'
Fulham 1
Kamara 67' (pen),
Red card: Anguissa (68')
Man of the match: Juan Mata (Man Utd)
