This report first appeared in Gulf Marketing Review's March 2008 issue. The full report with statistics is available for download at the bottom of this page.

Mortgage Sector Highlights

The mortgage sector in the UAE in particular has been witnessing continuous growth. The total mortgage to GDP ratio in the UAE is still far below most developed countries, and so the UAE enjoys relative security. This also indicates that there’s much room for growth in the mortgage sector in the UAE.

EFG Hermes has published a study of the nascent UAE mortgage market, which points to a ten-fold growth from $4.4bn today to $44bn by 2012. The implications for the development of the real estate markets of the UAE are enormous both in terms of deepening the market and selling prices.

60% to 70% of mortgages in Dubai are taken by owners-occupiers and analysts have said this number is likely to increase as more people in the middle-income segment look to buy homes. Aref Alharmi, CEO of Amlak, the Islamic home financing firm, said the largest growth will be in the middle-income base of home buyers who will require financing solutions over the next three to five years.

Amlak, the UAE’s largest mortgage lender by market value, posted fourth-quarter profits growth of over 120%. Tamweel, the second-largest UAE mortgage lender by market value, almost quadrupled fourth-quarter net profit as it more than doubled the income it made from its home loan business.
Banks in the Middle East were affected by the sub-prime mortgage crisis, when they reported fourth-quarter earnings. Global banks including Citigroup Inc and Merrill Lynch & Co Inc have written down at least $75Bn in credit market losses. Of the 20 largest Gulf banks by market value, only Abu Dhabi Commercial Bank has reported any sub-prime losses, writing down $19Bn in the third quarter.
The mortgage sector is growing throughout the GCC and not the UAE alone. The real estate forum in the Kingdom of Saudi Arabia recommended, at the end of its activities in Jeddah, to set the groundwork for a mortgage system. Amlak, the UAE's largest mortgage lender by market value, said yesterday it planned to launch a mortgage finance firm in Qatar with Barwa Real Estate to tap a real estate boom in Qatar, not mentioning how much it would own in Amlak Barwa Finance.

The Coverage

Amlak, the largest mortgage lender in the UAE, is a public entity and is the largest publicly held Islamic finance company in the UAE. Amlak had far greater coverage than Tamweel. Its coverage indicates more activities and offerings relative to Tamweel. Amlak’s coverage included such activities and events as its plan to distribute 10% dividends. It also issued sukuks and offered new services, national bonds financing, and more. Amlak has also been active in its participation and sponsoring of various events such as ESCA Seminar, a football championship and the Jeddah Real Estate Exhibition. Amlak, which has the highest market share in the UAE was awarded ‘Best Mortgage Finance Company 2007’.

What is most interesting in Amlak’s coverage is the expansion trend. Amlak is establishing the Amlak International for Funding of Retail Sector. It is also pursuing a banking license. It signed an MoU with World Bank’s International Finance Corp. to develop the housing finance market. Finally, Amlak is expanding geographically to Bahrain and Qatar.

Tamweel’s coverage indicated more financing activities, yet less PR work. It financed The Lakes, Bristol, Oxford Towers and Fairview Residence.

Tamweel brings together the legacy of Dubai Islamic Bank and Istithmar. It has more than 235 partners. However, its branches and work is strictly in the UAE. Evident from the coverage, unlike Amlak, which focuses on expansion, Tamweel focuses on attraction. The World Bank aims to purchase $20M from Tamweel’s sharia compliant securitization of its mortgage assets.

In terms of the breakdown of the coverage, both Amlak and Tamweel were very comparable in terms of the article types, languages, genres and frequencies’ penetrations. Interestingly however, Tamweel had higher coverage from magazines, despite its overall coverage being lower than Amlak’s. Amlak had a far greater coverage ratio from websites than Tamweel did.

Due to Amlak’s greater coverage, it also achieved a higher coverage size, higher impressions and higher ad values. However, Tamweel had a higher coverage size ratio than Amlak did. It also achieved a higher ad value per article ratio.

Amlak had substantial negative reputation drivers, due to its delays of sale of Islamic bonds, as well as its sale of its Egyptian unit. A good portion of Amlak’s coverage did not feature any reputation drivers. Tamweel on the other hand, had few negative reputation drivers and a reasonable coverage was void of reputation drivers.

Amlak and Tamweel’s messages were predominately manifest. However, It is worthy to note that Amlak had a higher percentage of latent messages; 3.14%, while Tamweel’s messages were 1.4% latent.

In terms of PR influence, it is very interesting to note that approximately half of Amlak’s coverage was not resultant of press releases, while Tamweel’s non-press releases coverage contributed to about a third of the overall coverage. In terms of strictly PR coverage, Amlak and Tamweel become comparable.

Amlak and Tamweel had somewhat equal unfavorable coverage, while Amlak had almost double the percentage of favorable coverage compared to Tamweel.

Amlak’s greatest coverage was present in all the GCC markets and not only in the UAE. This can also be attributed to Amlak’s expansion strategy. However, it is worthy to note that Amlak’s prominence value for its overall coverage was a mere 0.16, which is a value given to adjust the advertising value equivalent amount based on how prominent the coverage was. A 0.16 value means that around 16% of the advertising value achieved constitutes the actual or real advertising value equivalence. Tamweel, on the other hand, achieved a prominence value of 0.58, which indicates a much greater prominence in the coverage for Tamweel. This can be easily attributed to the fact that the majority of Tamweel’s coverage was in the form of press releases, while half of Amlak’s coverage only was in the form of press releases.

Conclusion

The mortgage sector in the GCC enjoys a lot of room for growth and companies like Amlak and Tamweel are enjoying the ride through their own distinct strategies. While Amlak seeks to expand to the retail and banking sectors as well as geographically, Tamweel seeks to grow locally and attract foreign investors.

Whether the strategy is of expansion or attraction, both methods seem to pay off for the respective mortgage lenders. It is to be expected that their growth will continue for the foreseeable future.