UAE mortgages soared in January over 50% cap

UAE mortgage brokers saw the value of home loan applications soar by over 100 percent last month, compared to January 2012, as residents scrambled to finalise deals following a 50 percent lending cap announced by the UAE Central Bank.

The cap, announced in late December, would have seen mortgages for non-UAE nationals limited to 50 percent of home value for the first purchase and 60 percent for a second property. The move led to a surge in demand for home loans in the emirate's property market, although the central bank later said such a policy would not be introduced in the immediate future.

“We have seen a huge rise in the number of mortgage buyers since the news came out that there will be a mortgage cap soon, the feeling is that buyers want to get in now before the cap does take effect,” Priyesh Patel, head of the sales and brokerage division at Dubai real estate firm Aston Pearl Real Estate, told Arabian Business.

“We are pretty much at our all time best month for January 13,” said Jean-Luc Desbois, managing director of mortgage brokerage homematters. “In comparison, January 12 we did circa AED50m of new applications versus AED109m this January.”

While federal authorities have not issued a definitive timeline for the implementation of the caps, Emirates Banks Association (EBA) chairman Abdul Aziz Al Ghurair said UAE banks have recommended mortgage loans should be capped at 75 percent of the property value for expats and 80 percent for UAE nationals.

In late January, central bank governor Sultan Nasser Al Suweidi told a local newspaper the UAE central bank will not impose limits on mortgage lending without consulting commercial banks, and any new rules were not imminent.

There was an “initial rush whilst the cap was being proposed and a steady stream after the Central Bank advised that it was not being enforced”, Desbois added.

The rise was most evident in Dubai, where Dubai Land Department data showed the number of mortgages in January 2013 rose 54 percent year-on-year to 571, while the total value of applications rose 156 percent.

In the wake of the December central bank announcement, Dubai expats began scrambling to close property deals as initial confusion over the mortgage cap took hold.

“My agreement is due to expire in a few days and if I don’t buy now I will lose the home I want as I will not be able to afford a house under the new rules. I have to buy today. It is very stressful, I should have bought an apartment last month,” a Dubai resident told Arabian Business on January 3.