Saudi to go big on housing
Saudi Arabia’s housing stock is expected to expand from 4.6 million units in 2010 by 2.4 million units during the next 10 years, with expenditures reaching SR1.3 trillion ($346 billion), a report said.
Annual demand will rise from 195,000 in 2011 to 264,000 units by 2020, added the Saudi Housing Sector Review published by the National Commercial Bank (NCB).
Key determinants, which include a growing population entering the marriageable age, an expanding labour force and a rising income per capita, have created a significant demand for housing, the report said.
A change in cultural norms has caused a drop in the average household size, it said. Thus, the average Saudi household size will decrease to 5.28 persons per occupied housing unit by 2020.
Key regulatory initiatives such as the King's injection of SR250 billion into the construction of new homes, the Real Estate Development Fund (REDF) allowing banks to offer bridge financing and the newly passed mortgage law will stimulate the demand for housing in the medium to long-term.
The lack of affordable housing continues to be a challenging issue, which has limited home ownership for Saudis, as renters account for the largest share of the population at nearly 60 per cent.
Assuming historical growth rates, the Gross Fixed Capital Formation in residential construction will amount to SR650 billion through 2020, the report said.
After factoring in the allocation of SAR250 billion, total expenditures will reach SAR900 billion, still short by SAR400 billion needed to meet the SAR1.3 trillion in housing expenditures.
According to the report, residential bank lending is estimated to reach SR60 billion in 2012.
The allocation of SR250 billion announced last year for the construction of 500,000 homes will largely benefit the low income segment. With the average value of a housing unit approximately falling in the SAR500,000 price point, such a level is within an affordable range to the lower income demographic.
The SR40 billion capital injection in the REDF and the increase in loan size from SAR300,000 to SAR500,000 along with the supplementary bank lending programme known as Dhamen, will primarily cater to the middle income segment.
This will allow for the purchase of an existing dwelling unit such as a villa at a cost that exceeds SR500,000 without a prerequisite to own land, according to the report.
As the mortgage industry matures and competition heightens, the middle income segment will stand to benefit the most from aggressive mortgage rates and lower risk criteria set forth by lending institutions.
- Home prices in Israel makes making ends meet impossible for families
- Putting their eggs in tourists' baskets: why Dubai's real estate developers are shifting to hospitality
- Is Dubai's property market finally displaying 'affordable' tendencies?
- Ironic much? Sharjah's 'affordable' rents is the exact reason they're now skyrocketing
- Mounting supplies: Dubai's impending property correction
- Averaging 80 kilos per month, see what this big loser did that broke records
- One big "house" party: Dubai's online eMart attracting hundreds of new real estate firms
- To go or not to go? Egyptian producers fear low turnout to film releases this Eid El Fitr
- GCC Investment Strategy and Sectors Outlook for 2006