Please find below a selection of news articles and stories relating to the property, mortgage and financial market in Dubai, from January 2009.

Business Intelligence Middle East

UAE banks assess exposure to property sector

Banks in the United Arab Emirates face the prospect of increasing loan defaults as the country’s property boom loses steam amid the global credit crisis.
Small and medium-sized real-estate developers are being hurt as home sales fall, making it harder for them to repay loans. Banks are also cutting lending, which is weighing on property values, bringing the fourfold increase in residential real-estate prices over the last five years to an end.
“Given the scale of banking sector exposure to property developers and contractors, a problem for the property sector is substantially a problem for the banks,” Raj Madha, a director responsible for equity research at EFG-Hermes Holding, said in a report.
Moody’s Investors Service on 16 December cut the outlook on four UAE banks, Dubai Islamic Bank, Dubai Bank, Abu Dhabi Commercial Bank and First Persian Gulf Bank, citing “mounting liquidity pressures and growing downward pressures on asset prices.” Standard & Poor’s cut its outlook on Dubai’s two biggest banks, Emirates NBD and Dubai Islamic, on 23 December, because of the impact of the credit crunch.
“The risk here comes from the medium-sized opportunistic developers who will have a funding problem at some point,” John Tofarides, an analyst at Moody’s said in a phone interview from Dubai. UAE banks’ “exposure to mortgages is not significant and not comparable to the U.S.,” he added.
Economic growth in the UAE, the second-biggest Arab economy, will slow to 2.7% in 2009 and 3.5% in 2010, led by a slump in its real estate and banking industries, Standard Chartered said in a research paper last week. The UAE economy probably grew 7% this year, the International Monetary Fund estimates.
Mortgage lending makes up an average 9% of the overall loan book at the UAE’s top 11 banks that Moody’s rates, Tofarides said. The overall exposure to the real estate industry, including mortgages, loans to property developers and contractors, averages 16%. UAE banks’ exposure to the real estate sector cannot exceed 20% of their deposits, according to current regulations, although that does not apply to Islamic banks.
Dubai house prices will start to fall in the fourth quarter, ending a housing boom that pushed prices up 43% in the first three months of the year, Colliers International said on 3 December. The price of villas in Dubai tumbled 19% in October from September, HSBC Holdings said recently.
Construction and real estate account for almost 50% of Dubai’s GDP, according to S&P, which said there may be a “sharp correction in this market.”
Non-performing loans at UAE banks average 1.5% of overall lending and may rise “manifold” if the decline in property prices is severe and remains depressed for a prolonged period, Tofarides at Moody’s said.
Some property companies in the region are cutting staff as they look for ways to reduce costs amid the credit crunch.

Reuters

The evaluation of Amlak and Tamweel's assets is due to be completed by February, a senior finance ministry official said.
A government body evaluating the assets of Dubai mortgage firms Tamweel and Amlak, due to merge under the newly created Emirates Development Bank, will complete its work early next year.
The committee had until the end of February to give its final assessment of the two Islamic lenders' share prices and the framework to decide the shareholder rights, Al Ittihad said citing senior finance ministry official Younis al-Khouri.
Officials from the two firms could not immediately comment. The UAE government said last month it was combining Amlak and Tamweel as well as its Real Estate Bank and Emirates Industrial Bank into Emirates Development Bank. The government said it would hold a majority stake in the new bank and suspended trading in the shares of the two firms.

From Gulfnews.com

Real estate set for reforms

Dubai: Last year started off with a bang in Dubai's real estate sector, with sky high sale prices and rents, and a series of attention-grabbing projects in the pipeline.
There was a massive 42 per cent increase in house prices between the last quarter of 2007 and the first quarter of 2008.
Additionally, high rents triggered many people to buy property rather than spend on renting, according to Sadallah Abed, property analyst at Colliers International.
The market was a property playground swarming with speculators and investors who wanted a piece of Dubai real estate action.
But as the global financial crisis hit property sectors worldwide and undermined confidence in the banking sector, a few reports published in early summer predicted a downturn in the Dubai real estate market as well. For example, a Morgan Stanley report forecasting a then-unlikely 10 per cent drop in property prices by 2010 triggered deep discussion among industry experts.
By the end of the year, concerns about the UAE property market were growing, particularly following announcements of job cuts and projects being put on hold.
The global credit crisis further complicated the situation as major home finance companies and banks restricted lending. Less mortgages mean less buying and, unfortunately, higher rents.
"With the lack of mortgage facilities, demand for rentals is actually going up, not down," Nicholas Maclean, managing director of CB Richard Ellis, said earlier.
Developers like Omniyat Properties and Damac are now rethinking payment plans in light of cash-strapped banks and other mortgage lenders.
Dubai's Real Estate Regulatory Authority (Rera) have continued to tighten and implement further regulations in an attempt to highlight the importance of transparency.
The end of December saw the creation of a compulsory online registration site for tenancy contracts, as Rera prepares to finalise the rental index some time in 2009.
The index will help to create zoned areas within Dubai, each zone having an average rental rate.
However, some residents in Dubai have questioned Rera's effectiveness, with dishonest developers still wheeling and dealing in the market and rental rates still high. They argue rents can only be set by market conditions, not by Rera.
The good news is that all of this combined should spell the end of the dreaded one-cheque policy, Marwan Bin Galita, chief executive of the Real Estate Regulatory Authority (Rera) said.
"This is what I'm strongly trying to introduce. People should have the choice, to pay monthly, or quarterly or in six months," Bin Galita said.
But it is hoped that by mid-2009, because of these regulations and genuine efforts to stabilise the economy, the current financial situation will cast no more shadows and Dubai's property industry will be stronger and more successful in the long-term.
Though the last three or four months have been decidedly grim, most analysts believe 2009 will be the year of the end-user, with liquidity awash in UAE banks and mortgage-lending institutions and property prices coming down to reasonable levels.

Jan 5th 2009 Emirates Business 247

Rental demand is expected to remain robust, but will increase at a slower rate in 2009, according to real estate experts.
"We expect rental prices to remain relatively stable in 2009, but they will likely soften in the first and possibly the second quarter," said Charles Neil, Chief Financial Officer of Landmark Properties.
"There is still demand for rental properties across all the emirates in the UAE, including Dubai and particularly Abu Dhabi, where there is a scarcity of readily available units," added Andrew Chambers, Managing Director of Asteco Property Management.
According to real estate agents in Dubai, so far in 2008, the villa market in the UAE has seen the highest increase in rental prices owing to the limited availability of villas.
"Villa rentals have seen the largest increase over the past 12 months, increasing on average by approximately 35 per cent, while apartment rentals have increased by approximately 25 per cent over the same period," said Andrew Macfarlane, Research Analyst at Cluttons.
Emirates Business spoke to a cross-section of real estate experts including Asteco's Chambers, Cluttons' Macfarlane, Landmark's Neil and Hesham Al Qassim, Chief Executive Officer of wasl and Dubai Real Estate Corporation, all of whom, said rental yields in the UAE remained attractive in comparison to the international markets. The experts, however, felt the market was now more demand driven. Meeting customers' preference would be the key for growth in the future, they added. Investors should do their research and invest not only in areas preferred by end-users, but also in buildings with design elements, finishing and layouts that customers prefer.