UAE banks boosted mortgage credit by nearly Dh18 billion in the first half of 2010 to reverse a sharp slowdown through 2009 because of a downturn in the sector and a post-crisis lending tightness, official figures have shown.
Personal loans by the country’s 23 national banks and 28 foreign units also gained momentum during that period to offset the general slackening in credit, mainly long-term loans to the private sector.
The Central Bank figures showed real estate mortgage loans swelled by over Dhnine billion to Dh159.8billion at the end of June from Dh150.3 billion at the end of May, bringing the total increase to Dh18.1 billion in the first half of 2010.
Personal loans for business purposes swelled by nearly Dheight billion to Dh179.2 billion at the end of June from Dh171.3 billion at the end of 2009.
In contrast, banks remained tight towards individuals, with personal loans for consumption purposes slipping to nearly Dh66.3 billion at the end of June from around Dh66.5 billion at the end of 2009.
The surge in mortgage credit in the first half of 2010 was in contrast with a slowdown in such lending through 2009, when it grew by about Dh15 billion after soaring by around Dh74 billion in the previous year.
The figures showed the combined personal and mortgage loans accounted for nearly 41.8 per cent per cent of the total credit of Dh966 billion by the end of June compared with 39.5 per cent at the end of 2009.
Analysts said the recovery in mortgage loans indicated a gradual return of investor’s confidence and easing of lending curbs by banks to some sectors.
In recent press comments, Nakheells Chairman Ali Rashid Lootah said he expected the real estate sector to be on top of the sectors that are projected to recover from the downturn caused by the global credit squeeze.
He said the real estate sector is going through a state of stability in terms of rents and property prices, adding that this made it more attractive for investors.
“The developments in Dubai’s real estate sector over the past two years have played a key role in restructuring the market,” he said.
“Our internal data shows that the property market in Dubai has a lot of strong pillars that allow it to be on top of the markets that will start their gradual recovery… these elements include the emirate’s advanced infrastructure and investment environment. We believe that the current stage is a transitional phase that will open the door for a new period in this market.”
Mortgage loans in the UAE sharply slowed down in 2009 as banks maintained their tight credit policies and chopped close to Dh13 billion off their balance sheets for bad debt, according to data by the Central Bank.
Poor investors’ confidence because of a general downturn in the real estate sector and bank liquidity shortages also contributed to the plunge in mortgage credit growth as part of an overall slowdown in domestic loans.
Lower credit allied with high bad debt provisions to depress the net earnings of UAE banks in 2009 despite strong general performance.
The country’s banking sector, the largest in the Arab world, made record provisions for non-performing loans of around Dh12.9 billion following its exposure to the troubled Saudi family businesses of Saad and Algosaibi.
In contrast with mortgage credit, banks’ general lending activity has remained dormant as they appear to be still risk-averse and demand by the private sector for loans has remained weak. Public sector borrowing also slackened in the first half of this year following a sharp rise through 2009.
The figures showed banks’ total credit to residents slumped to Dh774.4 billion at the end of June from Dh788.8 billion at the end of 2009.
The drop was caused by a decline in claims on the private sector to around Dh592.9 billion from Dh607 billion in the same period.
Claims on the government edged up slightly to about Dh92 billion from Dh91.8 billion after it soared by nearly Dh19 billion through 2009 from Dh72.2 billion at the end of 2008.