Just as it is recovering well from its real estate crash with foreign buyers returning to the market, Dubai has been dealt a potential mortgage blow.
The UAE central bank has decided to limit mortgage loans for foreigners buying residential real estate in the country to 50% of the property's value, it is reported.
The restriction is contained in a circular issued to commercial banks and it unconfirmed by officials. If true it could put off buyers who cannot come up with enough cash.
It is understood that the central bank's move is part of an effort to ensure that another bubble in UAE real estate does not develop. Property prices plunged by more than 50% between 2008 and 2011, triggering a corporate debt crisis in Dubai that forced the restructuring of billions of dollars of debt.
This year, residential prices in parts of Dubai began to recover and property developers laid plans for new high end projects. The central bank may want to head off the wild speculation that characterised the last property boom.
However, bankers said they were shocked by the circular, which could hurt confidence in the real estate market's recovery and hurt the share prices of property developers and banks.
This article is copyrighted by Property Wire - Premier global property news service