UAE mortgages likely to grow nine-fold in five years

The UAE's housing mortgage market is projected to grow nine-fold during the next five years to Dh161 billion in 2012, according to a research report by EFG-Hermes, a regional investment bank.
According to central bank statistics, up to the end of the second quarter of 2007, the UAE's financial system had a total of Dh46.3 billion in mortgage assets.
This includes a large amount of commercial mortgages. Residential mortgages are estimated at about half of that figure, with industry sources suggesting they are about Dh20 billion.
EFG-Hermes estimates current housing mortgages at less than Dh18 billion for 2007.
"Going forward, we assume housing purchases of around Dh680 billion over the next five years. If we also assume that 20-40 per cent of properties are mortgaged, and loan-to-value ratios of 70 per cent, this suggests that mortgages disbursed between now and 2012 will be of the order of Dh43 billion, making for a total market of Dh161 billion, implying a compounded annual growth rate (CAGR) of 55 per cent over the next five years," said Raj Madha, an analyst with EFG-Hermes.
In the short term, most of the growth is expected to be focused on Dubai, but towards the end of the five-year period, Abu Dhabi is expected to contribute significantly to the growth, although perhaps not reaching equality between the two emirates. By 2020, based on the same assumption, the report estimates the mortgage market will grow to Dh457 billion.
Over the last two years the real estate mortgage loan market (commercial and residential combined) has been growing at 92 per cent CAGR. Although growing at a high rate, over the next five years, growth is projected to fall to 55 per cent. Beyond 2020, EFG estimates that the market will mature to standard growth rates.
The housing finance sector has been growing rapidly for the last few years. However, unlike the property market, it is clear that the housing finance market is still massively underpenetrated.