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Saudi Arabia is to enact a new mortgage law within the next few months, potentially doubling housing demand in the country as an extra 1.5 million homes are planned.
The upcoming legislation will provide a particular boost to the under-served low- and middle-income markets by clarifying mortgage policies and introducing more mortgage options.
Deep Marwaha, event director of Cityscape Saudi Arabia, said that the new outlines will result in “much needed order” for this sector of customers as the country’s real estate industry evaded a housing correction and looks for growth.
“Jeddah alone has already rolled out a strategic plan to build almost a million units by 2030 to cope with rural migration and an expanding expatriate population,” he said.
Mortgage lending currently accounts for only 2% of the Kingdom’s GDP, and little over a fifth of Saudi nationals own their homes. Analysts predict the new law will trigger the country’s second housing boom.
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Around 1.5 million homes are expected to be constructed through 2015 to accommodate a rapidly rising population that is set to exceed 26 million within three years.
Long-term residential housing demand will remain strong, as almost 40% of the Saudi population is under the age of 14 and personal disposable income is projected to grow at a compound annual growth rate of 6.5 per cent to reach around SAR 659 billion by 2013.
Mr. Ayedh Al-Qahtani, chairman of Al Khobar-based Sumou Real Estate, said: “The Kingdom needs to enhance the way it finances housing purchases and how it uses financial instruments for such transactions if it wants to sustain its leadership in the regional property business. The mortgage law is an important step in broadening opportunities for buyers, investors and developers and establishing the country as a top real estate hub.”
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