Saudi Arabia’s housing market will see a limited impact in the short term from a mortgage law passed in 2012 as the focus of the law is on demand, not supply, a report said.

A long-awaited mortgage law approved enforced by Saudi Arabia in 2012 will have a limited impact on the housing market in the short term as the law mainly addresses demand not supply, the National Commercial Bank ( NCB ) said, noting that the market growth hinges on housing spending by the public and private sectors in the next 10 years.

The anticipated housing stock of 7.1 million units is expected to house a total projected population of 37 million during that year, Saudi Gazette quoted a report from the National Commercial Bank, the largest bank by asset in Saudi Arabia.

"Consequently, total housing stock in the Saudi housing market is expected to expand by 2.2 million units during the next 8 years, with annual demand rising from 186,000 units in 2011 to 265,000 units by 2020, the report said.

According to NCB, although the long awaited mortgage law was passed last year, it will not have a direct and immediate impact on the housing market in the short-term.

Additionally, the recently legislated enforceability and mortgage financing laws will provide all participants with much needed regulatory controls, the report said.

"While the initial details about the law seem to address demand, it does not address supply shortages. Ultimately, until precedence has been set, the enforcement and applicability of the law will be unknown,” said the report.

"Government and private institutional spending in the housing sector will have a major role in shaping the housing market over the next decade," it said.

It said a government decision to ease restrictions on obtaining loans from its development funds and the proliferation of the mortgage market will allow for more investment in the housing sector. Moreover, competition will allow consumers to benefit from competitive mortgage financing.

The report showed demand for housing, especially affordable units, continues to grow at a rapid pace in the Kingdom, according to Saudi Gazette.