Dubai's financial hub is studying a plan to kick-start mortgage lending in the emirate through the sale of bonds.
The Dubai International Financial Centre (DIFC) has laid the groundwork for a new UAE mortgage-backed bond market, which investors hope could revitalise the battered property market.
The DIFC Authority, in conjunction with Absalon Project, a joint venture between VP Securities and Soros Fund Management, is studying how private residential mortgages could be funded by bond issuances.
The plan is to create a large and liquid mortgage bond market, jolting the UAE's property sector back to life after a prolonged slump, while avoiding the problems related to mortgage-backed securities in the US sub-prime sector.
Dubai's property boom ended as the global financial crisis took hold, and property investors have struggled ever since.
One of the most high-profile casualties was the Ritz-Carlton Dubai at the DIFC, sold last year for Dh1.1 billion (US$299.4 million) by Union Properties as the developer tried to reduce its debts.
"The major issue that needs to be addressed is the lack of housing finance," said Dr Nasser Saidi, the chief economist of the DIFC Authority.
"Given the continuing deleveraging in the banking sector, the development of an active mortgage market through mortgage securitisation would provide liquidity relief to commercial banks while providing long-term investment opportunities to institutional investors."
The plan is based on the mortgage bond market in Denmark, which has been praised as being more stable than most other markets.
The bonds, which will be issued by lenders when a customer requests a mortgage, can be invested by institutions and retail buyers. Because the bond prices tend to move in the same direction as house prices, borrowers do not usually end up with negative equity in their homes.
Mortgage bonds account for a large proportion of Denmark's debt markets, with the €320bn (Dh1.64 trillion) market about four times the size of the government bond market last September, according to Nykredit, Denmark's largest mortgage provider.
Mortgages account for about 3 per cent of the total value of the $930bn of Gulf property projects, just under half of which are located in the UAE, according to data from Standard Chartered.
Dr Saidi also recommended the establishment of an Emirates Mortgage Guarantee Corporation, providing insurance coverage up to 30 per cent of the total mortgage value.
Mark Watts, the head of fixed income at National Bank of Abu Dhabi, said the proposed system would be well received by local markets.
"The Danish system is a lot easier to understand from an investors' perspective and operates more along the lines of conventional bonds," Mr Watts said.
However, Wagn Erik Nogaard, the vice president of VP Securities, which is working on the project with the DIFC Authority, said reform of the UAE's bankruptcy laws would be essential if the mortgage bond model was to succeed.
Rabih Tabbara, counsel at Kilpatrick Townsend legal consultancy, said that although the proposals would help the UAE's mortgage market, revamping its bankruptcy laws to allow banks to take security of underlying property assets would have a much greater effect. "That'll be what sparks new interest," he said.
"Many people are afraid to invest here … they have to sign all of these cheques in case something goes wrong."
ghunter@thenational.ae
PROVISIONAL FIXTURE LIST
Premier League
Wednesday, June 17 (Kick-offs uae times) Aston Villa v Sheffield United 9pm; Manchester City v Arsenal 11pm
Friday, June 19 Norwich v Southampton 9pm; Tottenham v Manchester United 11pm
Saturday, June 20 Watford v Leicester 3.30pm; Brighton v Arsenal 6pm; West Ham v Wolves 8.30pm; Bournemouth v Crystal Palace 10.45pm
Sunday, June 21 Newcastle v Sheffield United 2pm; Aston Villa v Chelsea 7.30pm; Everton v Liverpool 10pm
Monday, June 22 Manchester City v Burnley 11pm (Sky)
Tuesday, June 23 Southampton v Arsenal 9pm; Tottenham v West Ham 11.15pm
Wednesday, June 24 Manchester United v Sheffield United 9pm; Newcastle v Aston Villa 9pm; Norwich v Everton 9pm; Liverpool v Crystal Palace 11.15pm
Thursday, June 25 Burnley v Watford 9pm; Leicester v Brighton 9pm; Chelsea v Manchester City 11.15pm; Wolves v Bournemouth 11.15pm
Sunday June 28 Aston Villa vs Wolves 3pm; Watford vs Southampton 7.30pm
Monday June 29 Crystal Palace vs Burnley 11pm
Tuesday June 30 Brighton vs Manchester United 9pm; Sheffield United vs Tottenham 11.15pm
Wednesday July 1 Bournemouth vs Newcastle 9pm; Everton vs Leicester 9pm; West Ham vs Chelsea 11.15pm
Thursday July 2 Arsenal vs Norwich 9pm; Manchester City vs Liverpool 11.15pm
At a glance
Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.
Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year
Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month
Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30
Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse
Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth
Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances
Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
The rules on fostering in the UAE
A foster couple or family must:
- be Muslim, Emirati and be residing in the UAE
- not be younger than 25 years old
- not have been convicted of offences or crimes involving moral turpitude
- be free of infectious diseases or psychological and mental disorders
- have the ability to support its members and the foster child financially
- undertake to treat and raise the child in a proper manner and take care of his or her health and well-being
- A single, divorced or widowed Muslim Emirati female, residing in the UAE may apply to foster a child if she is at least 30 years old and able to support the child financially
Company Profile
Name: Thndr
Started: 2019
Co-founders: Ahmad Hammouda and Seif Amr
Sector: FinTech
Headquarters: Egypt
UAE base: Hub71, Abu Dhabi
Current number of staff: More than 150
Funds raised: $22 million
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The specs
Engine: Four electric motors, one at each wheel
Power: 579hp
Torque: 859Nm
Transmission: Single-speed automatic
Price: From Dh825,900
On sale: Now
Dubai World Cup factbox
Most wins by a trainer: Godolphin’s Saeed bin Suroor(9)
Most wins by a jockey: Jerry Bailey(4)
Most wins by an owner: Godolphin(9)
Most wins by a horse: Godolphin’s Thunder Snow(2)
Getting%20there%20
%3Cp%3E%3Ca%20href%3D%22https%3A%2F%2Fwww.thenationalnews.com%2Ftravel%2F2023%2F01%2F12%2Fwhat-does-it-take-to-be-cabin-crew-at-one-of-the-worlds-best-airlines-in-2023%2F%22%20target%3D%22_self%22%3EEtihad%20Airways%20%3C%2Fa%3Eflies%20daily%20to%20the%20Maldives%20from%20Abu%20Dhabi.%20The%20journey%20takes%20four%20hours%20and%20return%20fares%20start%20from%20Dh3%2C995.%20Opt%20for%20the%203am%20flight%20and%20you%E2%80%99ll%20land%20at%206am%2C%20giving%20you%20the%20entire%20day%20to%20adjust%20to%20island%20time.%20%C2%A0%3C%2Fp%3E%0A%3Cp%3ERound%20trip%20speedboat%20transfers%20to%20the%20resort%20are%20bookable%20via%20Anantara%20and%20cost%20%24265%20per%20person.%20%C2%A0%3C%2Fp%3E%0A
In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013