(MENAFN- Khaleej Times) The UAE move to cap mortgage levels to 50 per cent of a property's value for expatriates and 70 per cent for Emiratis is likely to impact the demand in the residential sector and slow the recovery of prices in 2013, a leading property consultancy said.
In its fourth-quarter report on the UAE property sector, Jones Lang LaSalle said that while Dubai could see a broader based real estate recovery in 2013, issues such as oversupply and the UAE Central Bank's mortgage proposal could weigh.
The move, announced on December 31, 2012, is aimed at controlling prices and preventing another property decline similar to the one which occurred a few years ago. Members of the Emirates Banking Association have reportedly requested a 30-day stay on its implementation in order to give them time to prepare for its introduction.
Craig Plumb, head of research at Jones Lang LaSalle in Mena, said the Central Bank announcement about caps on mortgage loan-to-value ratios showed that government authorities are concerned about market stability and want to avoid any rapid increase in real estate prices.
A Dubai-based real esate agency executive said the Central Bank move would help ward off a repeat of the 'exuberant boom' seen in 2007 and would help bring the much needed stability to the property sector.
Jones Lang LaSalle's latest market update for the fourth quarter of 2012 revealed that villa prices jumped by 24 per cent during 2012 and apartment prices in prime buildings climbed by 12 per cent. Apartment rents increased by seven per cent and villa rents by six per cent, with further rises expected during 2013.
Dubai's current housing stock stands at 354,000 units, with around 4,600 properties being added in the final quarter of the year. These included the completion of Tameer's 91-storey Elite Tower in Dubai Marina, Laguna Tower at JLT and Nakheel units in Jumeirah Village.
In total, 21,500 residential units completed in 2012 â€" 14 per cent fewer than in 2011 and 72 per cent fewer than in 2010. This is partly due to developers continuing to delay some existing projects.
The report added that over 45,000 units are scheduled to complete within the next two years, though the bulk of these are in out-of-town areas like Dubailand (6,078 units), Dubai Sports City (5,560), Dubai Silicon Oasis (4,249) and at Jumeirah Village (4,081).
"It is, however, likely that not all of this space will be delivered within this timeframe," it said. "With demand picking up, a number of previously-stalled projects are now resuming while new developments are being announced."
Rents in the cities office market are yet to show signs of recovery, though. Although rents in the prime central business district have stabilised at around Dh1,600 per square metre, vacancy levels remain relatively high at 31 per cent.
Rents for secondary space are continuing to drop and completion rates have dropped as developers seem unwilling to complete projects in a market which already has an oversupply of space.
For 2013, JLL believes that with investors and developers showing more confidence, there are grounds for cautious optimism about the prospects for the Dubai real estate market.
While 2013 is likely to see a broader based recovery, the strongest performance will remain concentrated on those projects for which there is confirmed investment and tenant demand, According to Alan Robertson, CEO of Jones Lang Lasalle Mena.
Abu Dhabi remains committed to a broad range of capital projects and infrastructure developments, but demand remains weak pending the return of major government capital spending whilst supply continues to drive the emirate's vacancy levels.
"Until we see more take-up of available space, rents will continue to suffer. However, as with Dubai, there are examples of where good quality space that is meeting expectations, has attracted quality occupiers and where rents have stabilised," said Robertson in a recent report.
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