Rising Abu Dhabi property prices don’t pose risk to banks

Rising residential real estate prices doesn?t pose a serious risk to Abu Dhabi banks as the industry is not reliant on leverage but backed by stronger fundamentals.

?Bank performance has improved in line with the strengthening of the local and Dubai economies. NPLs (non-performing loans) of Abu Dhabi banks have declined to a five-year low and provisioning at a six-year high, although asset quality issues remain.

?Capital adequacy is high, at 17.8 per cent at end-March 2014. Unlike the 2008 boom, the current run-up in prices is not reliant on leverage and is backed by stronger fundamentals. The authorities are also more attuned to the risks from rising house prices. Rising rents and a buoyant economy are pushing up inflation, which is forecast to average 5 per cent in 2016.

Abu Dhabi?s residential property prices increased 17 per cent in the first half of 2014, ?in its latest Abu Dhabi Real Estate Market Overview.

 

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