Mortgage lending in the United Arab Emirates, which opened its property sector to foreign investment beginning in 2002, almost doubled in 2007 amid a building boom, central bank data showed on Wednesday.
Total home loans at the end of December 2007 were worth 58.86 billion dirhams ($16.02 billion) compared with 31.02 billion dirhams a year earlier, the central bank said in a quarterly report on its website. The UAE’s burgeoning mortgage business has surged since 2002 as the second-largest Arab economy surged on a near seven-fold rise in oil prices and some emirates, including Dubai and Abu Dhabi, began allowing foreigners to invest in properties.
Dubai, home to islands in the shape of palms and a mall featuring a ski slope, has attracted foreign investors by allowing freehold ownership in many developments, while Abu Dhabi offers foreigners homes on 99-year leases in some areas.
Banks have boosted their mortgage offerings, encroaching on the market share of home financers like Amlak Finance, which has been expanding in new markets, including Egypt and Saudi Arabia, as competition intensifies at home. The Dubai-based Islamic mortgage lender posted a 74 percent jump in second-quarter profit this year as its home loan business grew.
Emirates NBD, the Gulf region’s biggest bank by assets, said in February its expected to almost double mortgage lending this year as lower interest rates encourage home buyers.
The UAE pegs its dirham currency to the dollar, which has forced it to track seven US interest rate cuts since last September and pushed down home loan rates across the country as inflation soars. Inflation has overtaken official lending rates in the UAE, making it cheaper for people to borrow than to keep money on deposit, encouraging investment in real estate, the main driver of the surging cost of living.
Prices rose 11.1 percent in the UAE last year, its highest in at least 20 years, as rents and household costs soared 17.5 percent.