The central bank will likely not revise its new rules curbing mortgage credit to prevent speculation that could lead to a fresh real estate crisis, a newspaper said on Tuesday.
Dubai-based Emirat Alyoum Arabic language daily said the central bank introduced the new regulations at the end of 2012 in a bid to control the market and curb freehold ownership after noticing a surge in mortgage lending.
The paper, quoted an unidentified “senior banking official” as saying the central bank had also noticed that property developers had against started selling units “on the map” and that such practices could give rise to speculation.
“We do not expect the central bank to revise its decision to cap mortgage credit..the central bank fears a fresh wave of speculation and deemed it necessary to put pressure on the banks to prevent them from lavishing mortgage credit amidst a surge in demand for property financing,” the banker said.
On December 31, the central bank told banks to limit their mortgage loan to expatriates to 50 per cent of the property value of the first unit and 40 per cent for the second and other units. Credit to Emiratis was capped at 70 and 60 per cent respectively.
Bankers, quoted by the semi official daily Alittihad this week, said the central bank decision would help arrest any sharp rise in rents and property prices.
Unlike Saudi Arabia, the UAE, the second largest Arab economy, does not have a mortgage law but is planning to enact such legislation.
The real estate sector in the UAE and other Gulf oil producers was jolted by the 2008 global fiscal distress before it started to recover only recently.
Follow Emirates 24|7 on Google News.