Property stocks in the UAE slid on the last day of the year after the central bank unexpectedly issued regulations curbing home mortgages, with heavyweight developer Emaar Properties weighing on Dubai's index.
The central bank said in a circular to commercial banks that mortgage loans for foreigners buying residential real estate should not exceed 50 percent of the property's value, with a 70 percent cap for local citizens.
The move appeared to be an effort to ensure that another bubble in UAE real estate did not develop, but analysts said it could slow the property market's fledgling recovery from the 2008-2011 crash.
Emaar fell 1.6 percent on Monday and Deyaar Properties slipped 2.2 percent. They were the top two most traded stocks on the broader Dubai index, which ended 0.4 percent lower. Islamic mortgage lender Tamweel fell 1.7 percent.
"It may slow down things," Mohammed Ali Yasin, managing director at NBAD Securities, said of the new mortgage rules, though he predicted the recovery of the property market would continue. Emaar responded by saying the new regulations would attract serious buyers to the market.
In Abu Dhabi, Sorouh Real Estate ended 0.8 percent lower, but there was no significant move by other real estate stocks. The index ended 0.2 percent higher, supported by Dana Gas, which rose to 0.44 dirhams from 0.43 after it made the latest in a string of announcements about gas discoveries in Egypt.
Despite Monday's drop, Dubai's index was the best-performing in the Gulf in 2012, up 20 percent after falling 17 percent in 2011. The main reason was the property market recovery.
Emaar, one of Dubai's most liquid stocks, gained nearly 50 percent in 2012 after a near 30 percent decline in 2011, as new projects and a focus on retail and hospitality businesses lifted investor confidence.
Other Gulf markets ended the year mixed. In Saudi Arabia, petrochemical stocks, closely correlated to global oil prices, dragged on the index, which extended the previous session's losses and declined 0.3 percent on Monday.
The benchmark gained 6.3 percent in 2012, supported by a strong domestic economy despite a shaky petrochemical sector.
Oman's index added 0.5 percent on Monday to close shy of the 5,800 point mark. Many traders in the country expect the rally to continue into the beginning of 2013, buoyed by strong government spending.
Bahrain's index fell 0.8 percent on Monday. The market was the Gulf's worst-performing in 2012, falling 7 percent to its lowest level since 2003, as political unrest deterred investment.