The UAE was able to avoid a US-style mortgage crisis thanks to strong government financial support.
The UAE Central Bank has said strong government financial support has helped the country avoid falling into a real estate mortgage crisis similar to that of the US.
The apex lender said in its 45-page financial stability review report that the International Monetary Fund (IMF) has identified 46 systemic banking crises in which more than two-thirds were preceded by boom-bust patterns in house prices.
“The UAE real estate market witnessed a similar pattern. Fortunately banks avoided a major crisis largely because of the high concentration of the domestic development activity in the hands of UAE government-related institutions which benefited from the government support at a crucial time,” the Central Bank said.
“This has enabled the bust cycle to evolve in a controlled environment and limited the systemic spill-over,” it said.
The data showed the real estate in the UAE grew by almost 16.1% cent in 2007 before slowing down to 2.6% in 2008 because of the global financial crisis.
In 2009, the sector contracted by 13.2 %,and slightly rebounded by 0.1 and 0.7% in 2010 and 2011, respectively, the report showed.