Dubai property sales fall as mortgage restrictions start to take effect
Naseema Ahmed, a broker at Indus Real Estate in Dubai, has been digging through her e-mails for leads after failing to sell a single home in the past month. She had been closing deals at a rate of about six a week since the market began recovering in 2012.
Dubai's housing market is slowing after the world's biggest price increases in 2013 prompted the United Arab Emirates Central Bank to restrict mortgage lending and the government doubled transaction fees.
Ahmed's sales drought is good news for Dubai financial authorities who have been trying to tame a market that has lurched between boom and bust since it was opened to foreign buyers in 2002. Home values will rise by 12 per cent in 2014 after surging by about 51 per cent last year, said Steven Morgan, head of the Middle East at broker Cluttons.
"Since January, we have seen a plateauing as new regulations aimed at curbing growth have gone into effect," said Morgan. "There would have been cause for concern if we had continued to see the kind of price increases we saw over the last 18 months."
Price growth is also slowing because recent increases have put homes out of reach for many buyers, said Liam Bailey, head of residential research at Knight Frank in London. Dubai home prices rose 35 per cent last year, the most in the world, Knight Frank said in a research report. Bailey predicted a 10 per cent gain in 2014.
Dubai's property market has been defined by steep rises and falls as builders of novelties such as palm-shaped artificial islands and the world's tallest tower turned the city into a business and tourism hub. Home-price gains were among the world's fastest in the years up to 2008 before the bubble burst and values fell as much as 65 per cent.
The central bank in October capped the size of mortgages banks can offer foreigners at 75 per cent of the value of a first home priced at five million dirhams (HK$10.55 million) or less. UAE nationals were allowed a loan-to-value ratio of as much as 80 per cent.