The policy also restricts lending to 40% for a second property for expats and restricts the amount UAE nationals can borrow to 70% for a first property and 60% for a second.
Some analysts believe it could help curb a rise in property prices and thus prevent the boom scenario that led to the market crashing in 2008 and prices falling by up to 60%. Others think it will have little impact as many expats rent rather than buy.
‘Most of the investors who are driving up prices are cash buyers. Investors don’t use mortgages, those are taken by the genuine users,’ said Kabir Mulchandani, chief executive of Dubai based real estate investment firm Skai Holdings.
He believes it could benefit the rental sector.
Mulchandani thinks that the decision could lead to a sharp uptick in rental prices, particularly in Dubai’s property market. ‘If this regulation continues, rents will go up because end users cannot come up with 50%. It will lead to more investors owning property than end users,’ he added.
According to Craig Plumb, head of research at Jones Lang LaSalle the policy will dampen price growth but it won’t make much of an impact on rents. ‘Sales price growth this year would have been less than 2012 anyway, but as a result of this new policy that’s going to certainly reinforce our view that the growth will be less,’ he explained.
‘I don’t think we are expecting it to impact on the rental price. What is likely to happen is that developers who aren’t able to sell the properties will rent them out themselves so the pool of properties will be about the same,’ he added.
However, Nicholas Maclean, Middle East managing director for real estate consultants CBRE does not think it will have much of an impact at all. ‘The mortgage buying section of the buying community is relatively small. We think it’s between 20 and 30%. So the majority of the market is unaffected. I don’t see this having a major impact on the market place but do think it’s going to have a stabilising impact on the market,’ he explained.
Lenders in the UAE have already asked the central bank to delay the new policy. The Emirates Banks Association has written asking for 30 day delay while the full implications are considered. It wants to see the cap for expats put at 60% and 80% for UAE nationals.
The introduction of a cap follows a partial recovery of house prices in Dubai and new plans for several mega new projects in the emirate.
