Home / ANALYSIS / Saudi's $32bn housing fund will boost residential construction

Saudi's $32bn housing fund will boost residential construction

by Neha Bhatia on Feb 10, 2018

Winds of change: A socio-economic evolution is reshaping Saudi Arabias residential market
Winds of change: A socio-economic evolution is reshaping Saudi Arabias residential market

Commenting on these findings, Raya Majdalani, research manager at Knight Frank, said the lack of affordability was among the factors that weakened the kingdom’s residential market: “The trend towards a weaker residential market is mainly due to eroding liquidity, and is exacerbated by a combination of more inherent factors, namely the lack of affordability and limited access to financing, supply shortage in the mid- to lower-end of the market, and the lack of suitability of existing stock.”

In spite of these challenges, Knight Frank said that it was “broadly positive” about the kingdom’s residential market, as a result of “government initiatives aimed at addressing key challenges restraining the residential sector”.

The report added: “Recent initiatives include the release of regulations for the introduction of a 2.5% white land tax on undeveloped land plots, the approval of regulations for the use and listing of real estate investment trusts (REITs), the introduction of a new mortgage law to boost Saudi Arabia’s home-ownership rate, the development of a home-building programme – named Sakani – by the Ministry of Housing, the launch of the Wafi online programme, and the creation of a real estate refinance company by PIF.”

Indeed, the Saudi government’s housing targets are clear – local authorities will develop 125,000 homes in 2018, compared to the 110,000 built last year, according to Al-Hogail. Most of these new units will cost between $66,700 and $200,000 (SAR250,000 and SAR750,000).

Saudi’s Ministry of Housing distributed almost 55,200 homes last year in Riyadh to facilitate home ownership. Meanwhile, in the Dammam Metropolitan Area (DMA), the ministry delivered 44,600 units last year, with additional handovers expected in 2018.

The Saudi Arabian government will not be the only developer to add to the kingdom’s residential market this year, however. The country’s residential property sector could see the addition of almost 40,000 units during the next two years, many of which are expected to be delivered by private-sector developers.

The residential market in Saudi Arabia is expected to witness the completion of 20,000 units in 2018 and 19,000 units 2019, according to property consultant JLL.

According to JLL’s A Year in Review report on the Saudi market, almost 19,500 homes – most of which were stand-alone units – were completed in Riyadh last year.

This movement brought the Saudi capital’s total residential stock to 1.2 million units. Projects completed in Q4 2017 included Phase 3 of Darraq in Riyadh’s Diplomatic Quarter, which saw the addition of 76 villas and 35 apartments, and 22 units of Sahab Villas, with its remaining six units expected to be completed in Q1 2018.

Developers of high-end residences are also expected to make a mark in the city’s property segment this year. The JLL report stated that Rafal Living’s 350 apartments, two Damac Towers buildings with a total of 440 apartments, and Malazak Tower’s 245 units were among the completions expected in 2018, with the Ramlah Tower project’s 249 apartments expected to be ready in 2019.