x Abu Dhabi, UAESunday 23 July 2017

UAE property: ‘No possibility of bubble’ Central Bank governor says

The governor of the Central Bank says prudence by bankers and recent mortgage caps will prevent a repeat of the 2008 property market collapse

Despite the rising price of property in Dubai and in prime spots in Abu Dhabi, the UAE Central Bank governor has dismissed fears of a new buddle. Pawan Singh / The National
Despite the rising price of property in Dubai and in prime spots in Abu Dhabi, the UAE Central Bank governor has dismissed fears of a new buddle. Pawan Singh / The National

ABU DHABI // The governor of the Central Bank yesterday dismissed fears of another damaging bubble in the property market.

A more prudent approach by bank lenders and recently introduced mortgage caps will prevent a rerun of the 2008 housing market collapse, Sultan Al Suwaidi believes.

“I think there is no possibility of a new bubble in the real estate sector for two reasons,” he said.

“I think banks have gone through the experience in 2006, 2007 and half of 2008. They know exactly that things that go up cannot go up for ever. I don’t think they will over extend themselves in the real estate sector.

“Number two, I think the new regulations regarding mortgage loans … will balance the whole issue. We’re not worried. We can sleep at night.”

Homes lost more than half of their value in the aftermath of the 2008 property collapse when speculators bought and sold off-plan apartments, driving prices to unsustainable levels. The rapid recovery of prices this year has created renewed jitters among some analysts.

The Central Bank ruled at the end of last month that mortgages for first-time buyers would be capped at 80 per cent of a property’s value for Emiratis and 75 per cent for expatriates.

About 70 per cent of home purchases last year were cash deals.

Expectations of a successful bid by Dubai to host Expo 2020 have provided further stimulus for the housing market.

“With just weeks to go before a decision is announced, speculation around Dubai’s bid for Expo 2020 continues to contribute to a prevailing sense of positive sentiment concerning the city’s real estate market,” said Alan Robertson, regional chief executive of the property services company Jones Lang LaSalle.

“While there has been concern over the possibility of another residential property bubble, and Dubai is as ambitious as ever, we believe these concerns are limited.”

mkassem@thenational.ae

tarnold@thenational.ae