UAE mortgage assets set to touch Dh64b by 2011

Dubai: The UAE's housing mortgage assets are projected to double to Dh64 billion by 2011 from Dh32 billion in 2007, according to estimates by leading mortgage providers in the country.

"The key factor that is driving growth of the mortgage sector is the strong performance of the real estate market. Real estate in turn is buoyed by many factors such as strong economic performance, political and social stability, steady population growth, negative real interest rates, and higher tourism receipts," said Hany Hussain, head of research, and Hany Seif, sector analyst, at Damac Capital International.

The companies that command the greatest share of the mortgage market in the UAE are Tamweel (34 per cent) and Amlak (29 per cent). The remaining 37 per cent of the market is divided among 23 mortgage providers, primarily commercial banks.

In 2007, while Tamweel's total assets almost tripled while Amlak's total assets grew by 90 per cent. In the UAE, mortgage lending represented 4.7 per cent in 2007 whereas the average for emerging markets mortgage is 15 to 30 per cent of GDP, according to Moody's Investors Service.

Although the dirham is pegged to the dollar, the interest rates in the UAE are higher, which increases the spread available to mortgage lenders in the UAE.

In the US, the mortgage rate is about 5.6 per cent for a 30-year mortgage and about 5.2 per cent for a 15-year loan. In contrast, mortgage rates in the UAE average 7.5 - 8 per cent, regardless of the tenor of the mortgage loan.

Local mortgage companies borrow funds from local banks at Libor plus a spread of 50 to 100 basis points.

However, the rate that mortgage companies charge their clients is Libor plus 300 basis points. This leaves them with a spread of 200 to 250 basis points.

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I had a chance to access the full report from internet. It is very informative. I hope Damac does not restrict its research like EFG. We want to know what stocks to buy and to sell.
Mohamed
Dubai,UAE
Posted: May 22, 2008, 11:39