MANAMA: The mortgage market in Bahrain and across the GCC slowed down in the first three months of this year and could slow further. But in the longer term the market in Bahrain could double to around BD700 million ($1.9 billion) in the next few years.
That was the view expressed by Sakana Holistic Housing Solutions chief executive officer R Lakshmanan at the opening session of a two-day GCC Mortgage Master Class organised by the Bahrain-based mortgage provider at the Diplomat Radisson SAS Hotel, Residence and Spa.
He argued that at present the market suffered from potential purchasers of property putting off buying until the outlook for the market became clearer while financial institutions were still slow to lend and were not lending the high percentage on house prices they were before the global financial crash.
Several topics will be discussed at the Master Class, including the importance of understanding the mortgage bank model, essential tools for managing the recession and mortgage specialisations such as off-plan financing and Islamic mortgages.
The presenters also detailed the key essential skills for building a model mortgage bank: operations, product, risk, customer service and distribution.
"We are delighted to play host to the 1st GCC Mortgage Master Class in Bahrain, and in fact in the region," said Mr Lakshmanan.
"It is our pleasure to be associated with Mungo Dunnett Associates from the UK in bringing to the region experts in the mortgage industry to share their professional knowledge through this Master Class.
"In keeping with Sakana's vision to be a catalyst for the prosperity of the housing sector including the mortgage market and in line with its mission of being the market leader in the mortgage industry, we have taken an extra step by hosting this event notwithstanding the gloomy backdrop of the world-wide economic crisis.
"The carefully tailored agenda outlined several topics and highlighted reasons to perceive 2009 as an opportunity to find capital in the current climate, address real business needs and build a sustainable mortgage bank.
"Bahrain's current residential mortgage market is highly competitive with more than a dozen players both conventional and Islamic," he said.
"As per the recent Central Bank of Bahrain report, outstanding personal loans secured by property mortgage were approximately BD327m in March.
"The total personal lending which includes mortgage was approximately BD1.65bn. "Based on estimates, the residential mortgage size currently stands approximately at 5pc of gross domestic product (GDP).
"However, the penetration level is low compared to a sample of countries in Europe with similar GDP per capita. We believe the market is expected to reach BD700m in the next few years," he said.
Guest speaker and Mungo Dunnett Associates chairman Mungo Dunnet said the Master Class aimed to provide and promote regional and international professional knowledge and best practices in the mortgage market.
"We believe the current economic situation with its challenges has provided the right situation to share and communicate our expertise in the mortgage industry," he said.
He blamed the current global economic crash on bad mortgage lending in the US.
"There was a loss of focus in the US market with both borrowers and lenders being driven by greed," he said.
"You had people taking out 125pc mortgages with lenders prepared to do this because they immediately packaged up the debt with other mortgages and sold it on to banks.
"The ratings agencies also have to take part of the blame for giving strong ratings to these financial instruments. We have on US case where a lender gave a 25-year mortgage to a woman who was 85 years old.
"People just seemed to believe that the cyclical nature of the market was a thing of the past, and there are some signs in the US that people are not learning and beginning to think that again in the face of a possible upturn."