UAE property defaults could hit US$25b: UBS

DUBAI: Investors and home buyers in the United Arab Emirates (UAE) may default on payments for properties that have yet to be completed, creating a liability for developers of as much as US$25 billion (US$1 = RM3.63) over the next two years, UBS AG said.

"We believe delinquencies on payment terms will be a growing concern over the next few years," Dubai-based UBS real estate and construction analyst Saud Masud said in an interview.

"In our view, investors are and will continue to default as per individual risk profile," Saud Masud said.

Dubai property prices have dropped 25 per cent from their September peak as banks reduced lending and speculators left the market because of the global financial crisis, Morgan Stanley said.
Dubai opened its property market to foreign investors in 2002, and Abu Dhabi followed three years later, fuelling a boom that was boosted by low interest rates.

"Our assessment of leverage in Dubai's residential property market is based on the cost to developers to finish properties should investors default on the upcoming supply of 140,000 units," Saud Masud said in a Sunday interview.

"We estimate this liability to be roughly US$20 billion to US$25 billion over the next two years," he added.

By Bloomberg