Dubai property stocks down as UAE plans to cap expat mortgages

Emaar shares decline on news the UAE is to cap mortgages for expatriates, prompting concerns that a recovery in the property industry may be at risk.

Shares in Emaar Properties dropped 1.1 per cent on news that the UAE plans to cap expat mortgages. Satish Kumar / The National

Dubai's property stocks are trading down after the UAE was said to have capped mortgages for expatriates, prompting concerns that a recovery in the property industry may be at risk.

Shares in Emaar Properties dropped 1.1 per cent, the first decline since December 25, to Dh3.77 at 10.30am on the Dubai Financial Market, trimming this year's rally to 47 per cent.

The stock led a drop in the benchmark DFM General Index, which slipped 0.4 per cent. Builder Arabtec Holding and property companies Drake & Scull International and Deyaar Development also fell.

The second-biggest Arab economy issued guidelines to restrict mortgages for expatriates to 50 per cent of property value, according to three bankers who saw a circular issued yesterday.

Home loans to UAE citizens can be as much 70 per cent of the value of the property for the first house and 60 per cent for a second house, two of the bankers said. The bankers declined to be identified because the information isn't public yet. There were no loan-to-value limits under the earlier policies.

The changes would be "clearly negative if implemented and could be even more so if applied retrospectively," said Julian Bruce, Dubai-based head of institutional trading at EFG-Hermes Holding SAE. The move "might take the shine off the anticipated continuation of year-end window-dressing," he said.

Nobody was available at the Abu Dhabi-based central bank to comment when Bloomberg News called.

Dubai's real estate market is showing some signs of recovery after prices plunged about 65 per cent over four years since the onset of the global credit crisis. Property prices in Dubai have crept up this year as the economy recovered and banks revived mortgage lending.

The recovery will help Emaar post a 16 per cent gain in 2012 profit to Dh2.07 billion ($564 million), according to the average estimate of 11 analysts on Bloomberg. Arabtec shares have rallied 47 per cent in 2012 and Deyaar's have surged 69 per cent, outpacing a 20 per cent gain in the DFM General Index.