Private financiers can lift Dubai property prices
Stuttering price growth in Dubai’s property market could be reignited if the emirate’s authority would allow private parties to finance assets, according to a study released yesterday. “Now might be an opportune time for the Dubai Land Department to consider offering options that encourage alternative financiers to enter the market,” Hadef & Partners said in its report, The Legal State of the Dubai Property Market.
Banks have a 25 per cent cap on their overall loan portfolio on how much they can lend towards property, according to regulations by the UAE Central Bank. Only local entities and institutions can register the title of the land, which constrains the ability of private financiers to to enter the market, the law firm said.
“The local banks are flush with liquidity but they are constrained by the regulations, whereas these entities won’t be,” said Mohammed Ali Yasin, the managing director at NBAD Securities in Abu Dhabi. “On the upside, they could re-energise the market.”
The presence of alternative financiers could also increase risks, he said.
“But my fear is if you get a volatile movement or a repeat of the crashes of 2008-2009, these private or foreign entities won’t be as sympathetic to the market. They won’t help their customers if they default, or cool them down instead of forcing them to execute a sale...local entities would find a way, perhaps rescheduling or whatever. And that would create negative pressure and really hurt the market,” said Mr Yasin.
The price of villas in Dubai was flat in the third quarter compared to the previous three months, as mortgage caps introduced late last year continued to dampen the volume of property transactions, according to Colliers International.
In the third quarter, property transactions were 6 per cent lower than that of the previous quarter, data from the real estate services company showed.
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Published: December 24, 2014 04:00 AM