Bursting the bubble?

With house prices in Dubai rising by nineteen percent last year, many have been fearing the return of a property bubble. The central bank’s move to put a cap on mortgages aims to change all that, but is the announcement too much, too soon?

Martin Legeur

the mortgage cap has no effect on any buble in dubai. a buble comes from flipping and anyone who takes mortgage cannot flip, it is who put 10 or 20 % directly with a developer on an off-plan project and then resells at a higher price. lets face reality and common sense, why would someone and buy property in dubai if they cant afford at least 50% and according to studies in the GCC a minority of expats can hold jobs for more than 10 yrs while any mortgage will go to 25 years!!! do the risk and the math.

Akbar Kazmi

Good for banks, but Bad for bankers. Any new major developments by developers for residentail or office space will likely be held back as their ability to sell to end buyers will be limited in light of latter's ability to generate 50% cash from own savings. Resultantly, banks will be risk averse to finance projects by developers. Therefore, less new property coming into the market, which is good and will support prices of existing completed property over the long term. This cap also protects banks from loss in case the market prices fall as the "cushion" of protection at 50% is substantial. Bad for bankers in the short term as this will most definitely affect their profit outlook for 2013 and beyond, and to pretect that profit, the banks will shed their retail/mortgage lending staff. Since lending to developers will also reduce, overall staff strength will be re-examined


The rules are still unclear as to whether this only applies to expats. I have been told a similar thing will apply to nationals as well. Anyone know anything about that? This is a good move by the way, don't buy what you cannot afford, instead, try to find something in your price range. Because at 20% you can always walk away from your "dream home", that's how most expats seem to live here, with that eternal emergency exit door open. And yeah, yeah, yeah, your stay is not permanent, have heard all that before. It still does not mean you can live it up and split once you can't afford your dues.

ronnie k

yes. there is a lower cap on Emiratis as well.

ronnie k

Any rule or law that curbs excessive speculation is good for everybody.

most small to medium investors and end users will be glad that the speculation fueling sharks will have to think twice before flipping a property.

What is the real reason for the recent rise in price of apartments? It may be that the confidence has returned or it may just be that the combination of rich cash speculative investors and their buddies in the real estate agencies are fueling this..?


It is unfair without giving proper notice to change mortgage laws.I am sure authorities here will take the right decision to support all the people concerned.
However this change will not affect the pricing nor will have a bubble effect. The economy is going steady. Rich people around the countries outside UAE is finding it safe to invest in properties in UAE esp Dubai and the prices will go up by another 10-15% in the short term and then will hold. Rents will go up. However not like the previous boom, but in realistic terms.



which real estate are you working for? cause i was thinking of buying an apartment for my self and I believe you really can give me fact full ideas ?!!!!!


My friend invested his 100,000 dollar savings into the first installment towards a property in Dubaiiiii & I had a sentiment towards gold & I invested in gold which was trading @ 72 dirhams per gram then. All 80,000 dollars went into it. I was saved by the skin. Though i was never interested in property here, i still have an investment which has grown almost 3 times.


I can relate to the Akerman story, was about to purchase a house in Al Furjan after years of saving money. What a bad decision this is for all expats like me and Akerman. The rich are getting richer....


The mortgage cap is a very mature robust step by the central bank it is sensible that only people with commitment and resources step into the Dubai property market, with easy finance you have too many opportunists and wannabe's jumping in and then crying wolf and ranting against the authorities for not protecting them!

The Consultant

Having resources and being committed do not necessarily sit together. In fact, the least committed people are likely to use cash, whereas anyone who goes to the trouble and expense of arranging a mortgage is probably intending to hold on to the property for a number of years.

The local market is already vulnerable to hot money flowing in, then being destabilised when it flows out again. The CB's move will at least mean less chance of the banks taking losses if the market does drop, but it will do little if anything to deter speculation. As others have said, time restrictions and/or higher taxes on flippers would be much more effective.

Peter Cooper

this would be short-term negative and long-term positive for house prices. Cash investors around the world will see this as an opportunity, both to buy while there are less buyers available and to own in a market where the central bank is behaving like a guardian of stability rather than pushing liquidity into the system (that's most of the rest of the world). Given that cash buyers already out-number those seeking mortgages it is actually more important for the market to keep the cash buyers happy than the mortgage payers. That said this is a bitter blow for those about to buy with a mortgage who can't now do it, and they will lose out as prices go up and rents go up too. But they are the only losers, the UAE housing market will actually gain from this in the longer term.


Several points well made. To mitigate against speculators, the Central Bank should penalize all property sales made within two years of property completion/possession. Those without residency visas should face higher minimum deposits.
Long-term residents who wish to occupy their property should face a cap, but a more realistic one of 70-75%. Fifty percent is too high for those of us who earn executive salaries, but, forbid, may be transferred and pay stiff penalties for early settlement, another impediment to mid- to long-term real estate market stability and growth. A comprehensive, mature, well-planned mortgage law is needed, and quickly.

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