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Dubai property collapse in 2009 deflated mortgage market, new figures show

The biggest decline in new mortgage approvals was in May last year when they dropped 93% and in September when they fell 96%, the figures from the Dubai Land Department show.

However, some months actually saw an increase in volumes, notably February, July, August and November when approvals increased by 16, 35, 31 and 25% respectively. Overall in 2009, there were a total of 3,059 new mortgages worth a total value of $7.56 billion.

It is not all bad news, according to Jesse Downs, director of research and advisory services at property company Landmark Advisory.

She said that while the mortgage market has shrunk its percentage of the whole markets has remained constant. ‘Based on our transactional data, approximately 20% of transactions in 2008 were purchased with a mortgage. Interestingly, in 2009 this remained steady at 20%. While transaction volumes have decreased in 2009, the relative portion of mortgage activity has remained unchanged,’ she explained.

There was a rise in the value of mortgages last month, despite the onset of the Dubai World debt crisis. But experts do not think there will be an improvement in the mortgage market in 2010.
‘In 2010 we foresee little change in mortgage activity. While there are facilities available, the high cost has left banks unwilling to use these facilities and liquidity constraints persist. With high interest rates and prominent lenders like Amlak and Tamweel absent, we expect the current trends to continue,’ said Downs.

Dean Biddulph, senior financial consultant at Independent Finance, believes there may be just a lag in the system and the backlash will eventually be seen. ‘December was indeed a bit of a surprise but I think we might still get a bit of a back lash on this in 2010,’ he said.