KSA housing shortage revealed in Riyadh report

The supply of housing units in Riyadh is not keeping pace with the growth in population. (Getty Images)
[More Images]

A recent report by global real estate services company Jones Lang LaSalle has highlighted the growing need for affordable housing in the Saudi Arabian capital Riyadh.

The firm’s Riyadh City Profile said there is a healthy number of commercial and hotel projects in the pipeline but the supply of housing units is not keeping pace with the growth in population.

Riyadh’s population is estimated at 4.9 million, 19% of the national total, of which 1.7 million are expatriates. Between 2004 and 2008 the population grew by a Compounded Annual Growth Rate (CAGR) of 3.3%.

The number of residential units currently under construction represents less than 5% of the existing stock and there remains a huge potential for “big real estate opportunities”, said the report.

But a number of factors are currently holding developers back, it added.

The first being uncertainty over when the government will approve new mortgage laws. The laws were tipped to be approved this year and will make finance more easily available to the local population.

Advertisement

FEATURED COMMENT Please click here to comment on this article

Another problem facing the market is a lack of local developers capable of delivering large housing projects. As such it is expected the number of joint ventures with foreign experts and contractors will increase.

Affordability also remains a “big challenge” to converting latent demand into actual sales activity.

“Average household income in Riyadh is around SAR 8,100 a month which makes housing above SAR 900,000 hard to afford under conventional financing arrangements,” said the report.

“This is going to require innovation in the current practice in respect of business models, planning, technology, and regulation.”

Developers will also have to take into account recent changes to real estate regulations which banned the practice of selling off-plan unless approved by a new national commission.

 “It will no longer be possible to use advance payments as an internal source of finance for expenditure not specifically related to the project,” said the report.

“All project payments will be kept in escrow and disbursed to pay out project costs as determined by the commission.”

The positive spin off will be an increase in buyer confidence in off-plan sales.

The full report can be found at: http://www.joneslanglasalle-mena.com/MENA/EN-GB/Pages/Research.aspx

 

---