Barclays has just won the first foreclosure case in Dubai. Now investors and traders look on to see if this precedent will be followed by a rush of foreclosures. There are already pending foreclosure cases in process. The legal system in Dubai had not adequately dealt with foreclosures in the past. A mortgage law passed in 2008 is now working, and if applied efficiently, will bring outside confidence to the Dubai legal system. While this is very likely to lead to further pain and risk aversion in the short term, it is a positive in the long term.
Mortgage lenders may not rush in to foreclose all possible properties however. Doing so would likely increase the devaluation in housing prices, leading to more foreclosures. It’s a slippery slope, one lenders will look to manage cautiously.
