Saudi rents, land prices seen rising through 2014
Riyadh, March 27, 2011
Rents and land prices in Saudi Arabia are seen rising by 10 per cent each year until 2014 driven by increasing demand for new homes in a hugely undersupplied market, property consultancy Jones Lang LaSalle said.
The world's top oil exporter needs to build up to 200,000 new homes a year for the next five years to meet demand for about 900,000 new homes in the kingdom, John Harris, director of the firm's Saudi arm, told Reuters in an interview on Sunday.
'Rental and purchase prices are seen going up faster than inflation over the coming two to three years. They are seen growing as fast as 10 per cent a year,' he said.
Saudi Arabia is facing a massive housing problem due to rapid population growth and an inflow of expatriate workers coming to the kingdom.
In a rare televised speech last week the Saudi king announced $93 billion in social handouts, the second benefits package to be unveiled within a month, and included SR250 billion ($67 billion) to be spent on 500,000 new homes.
In another move to address the problem, the kingdom on Friday set up a ministry for housing.
Harris said that recent announcements on housing and job creation would boost confidence in the kingdom's property market, adding it could take between five and ten years to build the new homes announced by the king.
A recent report by Banque Saudi Fransi said private and public developers need to build about 275,000 units a year through 2015 to meet demand for about 1.65 million new homes in the country.
Harris said that developers would start to shift their focus from high-end property to build more homes for the mid-end segment, where much of the kingdom's demand lies, and also turn their attentions to opportunities in smaller cities.
'Secondary cities in Saudi Arabia are becoming much more important real estate markets,' he said.
'We have seen a number of developers focusing on places like Jazaan, Hofouf, Tabuk and Taif. They have small public sector employment in these cities and are stable markets.'
Harris said that Saudi Arabia's property market would continue to grow with or without a long-awaited mortgage law.
The absence of a clear mortgage law, which has been in planning stages for almost a decade, has left Saudi with no framework to govern property ownership, deterring foreign banks from lending and private developers from entering the market.
Saudi Arabia has only a 2 per cent mortgage penetration in its real estate market, industry experts say.
Economists and experts say that between 30 and 50 per cent of Saudis own homes, but the majority of young Saudis do not.-Reuters