A leading UAE banker has called on banks to offer more support to customers suffering from negative equity as a result of the sharp decline in house prices in the emirates.
“[The market] is facing difficulties of course because of the very sharp reduction in prices as the value of the mortgage has reduced,” Mohammad Nasr Abdeen, CEO of Abu Dhabi-based Union National Bank (UNB) told Arabian Business.
“So I think the [banks] have to understand this and try to support the customers and help the customers and co-operate to get out of this situation.”
“The solution is the time,” said Abdeen. “You have to live with this and the good bankers should help the customers and have some patience and try to reschedule their loans and give them time because if banks go and force customers to take actions or to sell their properties with low prices this will add to the problems.”
Residential property prices in Dubai have plunged 55 percent from their peaks in the third quarter of 2008, according to the median estimate of 14 banks, investment firms and research institutions, Reuters reported in July. Prices in Abu Dhabi have fallen 40 percent, the median of 12 estimates also showed.
However, Abdeen predicted that prices are unlikely to fall much further. “We are very close to the very realistic value and I don’t expect a sharp decrease in values anymore. I can take about five or 10 percent but this will be temporary.”
In the meantime be reiterated it stance that “banks should consider some support during this period until the cycle moves up again.”
While the issue of negative equity is a “general problem” for the UAE banking community, Abdeen said it was not something which UNB has been impacted by. “For us, we don’t have any of these problems as at that time we were not financing more than 50 percent of the value during all those days. That is why people used to consider us a conservative bank but it’s a cycle and if you are aware of this cycle you should put your act together to,” he added.
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