Dubai Suitcases of Cash Circumventing Loan Regulators

 

Dubai real estate agent Laura Adams remembers the Iranian homebuyer because of how he wanted to pay.

“He literally put a suitcase on my desk, opened it up and it was full of 1,000 dirham notes,” the Carlton Real Estate managing director said in an interview. “I asked him to go across the road to Western Union and get it exchanged for a manager’s check, half a million dirhams ($136,000).”

Cash is king in the Persian Gulf emirate’s rebounding property market, limiting the power of regulators to control rising prices that fueled the last property bubble by imposing restrictions on mortgage loans to foreigners. Buyers from Iran to Russia to Greece are paying cash in as many as 70 percent of Dubai home purchases, up from 49 percent in 2007, according to researcher Reidin.com.

The United Arab Emirates central bank, which oversees seven emirates including Dubai, issued the rules last month limiting mortgages to expatriates in an effort to prevent the type of speculation that created a property bubble that burst in 2008, sending prices down as much as 65 percent. While the caps may do little to curb price increases, they will hamper efforts by banks to revive credit growth.

Bloomberg News