Dubai: Banking and real estate shares could come under pressure in the short term due to the UAE central bank’s new mortgage lending restrictions. But the general outlook for the stock market remains positive, according to Anastasios Dalgiannakis, the head of institutional trading at Mubasher Financial Services in Dubai.
The UAE central bank on Sunday introduced caps on mortgages for foreigners and nationals.
“The new rules are good for a more orderly market as well as for the banks. The new rule will also give more protection for the banks and may be positive for the real estate sector in the long term,” he said.
He said the new rules will take some steam off the market, especially for property and bank stocks, but it is good news nevertheless when it comes to the long-term market outlook.
“The Central Bank is cautious and the authorities aim to prevent another property bubble in Dubai,” he said.
Fall in Emaar share price
Leading real estate developer Emaar Properties retreated the most in two weeks and led Dubai property shares lower with a 1.57 per cent decline to close at Dh3.75 while Deyaar also fell 2.22 per cent to Dh0.352.
However, Union Properties bucked the trend, climbing 1.28 per cent to Dh0.395, while the main market index, DFM, fell 0.4 per cent on Monday.
In Abu Dhabi, the picture was slightly different. Sorouh fell 1.26 per cent to Dh0.79, while the main index, ADX, closed up 0.15 per cent.
Property prices in Dubai plunged by more than 60 per cent between 2008 and 2011 and are showing signs of recovery now. Buyers will be “more genuine” and there will be no room for speculation. Property prices “could see a fall as most expatriates probably won’t be able to afford pumping in a 50 per cent down payment,” added Dalgiannakis.
Traders expect activity to pick up next week as the focus shifts to company earnings after the holiday season.
The new rule “will benefit the economy and will bring more stability to the banking sector,” Dalgiannakis said.
According to the Arab Monetary Fund’s latest report, Abu Dhabi Security Exchange’s market capitalisation grew by nearly $12 billion (Dh44.07 billion) in 2012 while Dubai’s market capitalisation rose slightly to around $49.8 billion from $49.5 billion in 2011.
The move by the UAE Central Bank would test the resilience of domestic markets and their ability to absorb tougher regulatory policies.