DUBAI — Mortgage lending in the United Arab Emirates increased an annual 97 per cent in the second quarter as foreigners bought property in the Gulf state.
Outstanding loans to buy homes rose to Dh45.7 billion ($12.5 billion) at the end of June, the central bank said in a quarterly statistical bulletin published on its web site on October 1. Mortgage lending growth was 86 per cent in the first quarter.
Demand for home loans has leaped since 2002, when foreigners were allowed for the first time to buy property in Dubai. The number of housing units in Dubai will increase 60 per cent to 420,000 between 2006 and 2009, according to EFG-Hermes Holding, Egypt's largest investment bank.
"It is a phenomenally high growth rate but it's coming from a very small base," Raj Madha, banking analyst with EFG- Hermes Holding, said yesterday.
"There may be some concern that lending criteria are being eased to maintain the growth rate, but we don't think that is a critical issue."
Growth in non-mortgage loans, advances and overdrafts accelerated to an annual 25 per cent in the second quarter from 9.3 per cent in the previous three months, the central bank said yesterday.
Smaller loans: "This level of growth is largely in line with what we have been expecting, but anecdotally there has been some concern that banks are not keeping a close enough eye on smaller loans, which individuals are able to take out with a number of different banks without their knowledge," Madha said.
Foreign assets held by the Central Bank of the UAE grew 23 per cent to Dh159 billion in the three months through June. Annual M2 money supply growth, an indicator of future inflation, was 34 per cent at the end of June. No comparative figure was given.
Inflation in the UAE will slow to 7.4 per cent this year from 9.3 per cent in 2006. The UAE central bank pegs the dirham to the dollar and generally follows the Fed when setting rates.