The country's biggest bank has urged a rethink of the Central Bank's plan to cap local and expatriate mortgages.
Amid a property industry backlash, National Bank of Abu Dhabi (NBAD) said it was surprised with the "sudden decision".
The Central Bank’s plan appears to have created confusion in the market. A note from Bank of America Merrill Lynch to clients this week said: “We have spoken to mortgage departments of a few banks who are all seeking clarity from the [Central Bank] … this is likely to have an immediate impact on mortgage lending going into the new year.”
NBAD, which has a market capitalisation above Dh39 billion (US$10.61bn), and other lenders were taken by surprise this week when the central bank introduced loan to value limits on mortgages.
“We were not part of this decision making,” said Abdullah Al Otaiba, the senior general manager of domestic banking at NBAD.
“We would like to understand what is the benefit of such a decision in a market that is about to recover.”
Under the Central Bank’s new plan, expatriates would only be able to borrow up to 50 per cent for the first house and 40 per cent for any further properties, while UAE nationals could borrow up to 70 per cent for the first house, and 60 per cent after that.
The plan to cap mortgages is part of a wider reform that will distinguish ordinary home purchases from buy-to-let investments.
House prices soared before the market collapsed in late 2008. Speculators buying and selling property beyond their means were partly blamed for the collapse.
“The regulations aim to protect both lenders and consumers’ rights,” a UAE Central Bank said this week. The regulator was unavailable for comment yesterday.
The Central Bank’s move comes as bad loan provisions declined for the first time since the Dubai property crisis, and amid a delay in new regulations to cap lending to government and government-related entities. Provisions fell to Dh65.3bn at the end of October, from Dh65.4bn in September, according to statistics provided by the Central Bank in December.
The Central Bank postponed a decision to curb government lending after the country's two biggest banks, Emirates NBD and NBAD, did not meet the September deadline to comply with the new rules.
The latest decision by the Central Bank is expected to impact the broader banking and mortgage market, bankers and brokers said.
The rule change is “a massive deal”, said Mario Volpi, the head of residential sales and leasing at Cluttons in Dubai. “In the short term, it means that people won’t buy. People thinking about buying will have to pay larger deposits.”
Investors who buy properties with cash would benefit. “They will start bargaining a little harder with the seller,” Mr Volpi said.
"Sellers at first will not come down but as weeks become months they will do. Cash is king for now."
halsayegh@thenational.ae
* additional reporting by Lianne Gutcher
Clarification: According to the UAE Central Bank, the new limit on mortgage borrowing for expatriates is 50 per cent for the first property and 40 per cent for subsequent properties, not 60 per cent and 50 per cent as originally stated in this article. This story was amended on January 6 2013.
Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
On Instagram: @WithHopeUAE
Although social media can be harmful to our mental health, paradoxically, one of the antidotes comes with the many social-media accounts devoted to normalising mental-health struggles. With Hope UAE is one of them.
The group, which has about 3,600 followers, was started three years ago by five Emirati women to address the stigma surrounding the subject. Via Instagram, the group recently began featuring personal accounts by Emiratis. The posts are written under the hashtag #mymindmatters, along with a black-and-white photo of the subject holding the group’s signature red balloon.
“Depression is ugly,” says one of the users, Amani. “It paints everything around me and everything in me.”
Saaed, meanwhile, faces the daunting task of caring for four family members with psychological disorders. “I’ve had no support and no resources here to help me,” he says. “It has been, and still is, a one-man battle against the demons of fractured minds.”
In addition to With Hope UAE’s frank social-media presence, the group holds talks and workshops in Dubai. “Change takes time,” Reem Al Ali, vice chairman and a founding member of With Hope UAE, told The National earlier this year. “It won’t happen overnight, and it will take persistent and passionate people to bring about this change.”
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Top investing tips for UAE residents in 2021
Build an emergency fund: Make sure you have enough cash to cover six months of expenses as a buffer against unexpected problems before you begin investing, advises Steve Cronin, the founder of DeadSimpleSaving.com.
Think long-term: When you invest, you need to have a long-term mindset, so don’t worry about momentary ups and downs in the stock market.
Invest worldwide: Diversify your investments globally, ideally by way of a global stock index fund.
Is your money tied up: Avoid anything where you cannot get your money back in full within a month at any time without any penalty.
Skip past the promises: “If an investment product is offering more than 10 per cent return per year, it is either extremely risky or a scam,” Mr Cronin says.
Choose plans with low fees: Make sure that any funds you buy do not charge more than 1 per cent in fees, Mr Cronin says. “If you invest by yourself, you can easily stay below this figure.” Managed funds and commissionable investments often come with higher fees.
Be sceptical about recommendations: If someone suggests an investment to you, ask if they stand to gain, advises Mr Cronin. “If they are receiving commission, they are unlikely to recommend an investment that’s best for you.”
Get financially independent: Mr Cronin advises UAE residents to pursue financial independence. Start with a Google search and improve your knowledge via expat investing websites or Facebook groups such as SimplyFI.
