Mortgage lenders await upturn

The Gulf has largely avoided the writedowns of repackaged subprime mortgages that unleashed such havoc on global financial markets last year. But instead, the nascent local mortgage industry has been hit by a slump in domestic property.

Across the region residential property values and rental costs have declined, some even more deeply than in the US. Analysts say house prices in Dubai, the most developed mortgage market, have fallen by about 50 per cent.

“Until recently, the real estate markets were a one-way street where prices always went up,” says Ventakesh Srikantan, head of assets and liabilities at HSBC Middle East. “But now we are witnessing a serious property downturn and credit stresses are emerging in many portfolios.”