Government-backed projects for Saudi’s housing markets have been slow-moving, but private sector developers are looking to fill the gap. Nick Ames reports
Saudi Arabia is becoming a beacon for real estate development and investment as the Kingdom struggles to cope with a massive housing shortfall.
One million new homes are estimated to be needed over the next five years as a combination of a young population and an expected influx of expats is forecasted to swell numbers.
Saudi’s Ministry of Housing has been swamped with demand for new homes – its website recently saw more than 1.2m requests in its first 36 hours of operation.
The government has committed itself to backing construction projects and is in the process of making it far easier for first-time buyers to obtain mortgages. However, a recent Marketview report from analysts CBRE said that public housing projects had suffered from ‘inertia’ since announcements were first made in 2011, but this was being addressed by taking land allocated for housing from municipalities and putting it directly into the hands of the Ministry of Housing.
In the meantime, private companies are forging ahead with plans to provide new homes in what is being dubbed “a land of opportunity.”
The country’s housing minister Dr Shuwaish bin Said al-Dhuwaihi has signed eight contracts worth $1.06bn to develop 26km2 of land across the Kingdom. And one major developer working in Saudi is private equity investor Gulf Capital which has negotiated a $120m loan with the country’s National Commercial Bank.
This has enabled its property division, Gulf Related, to initiate two major housing projects in Riyadh – Saudi Arabia’s fastest growing city.
Emile Habib, director, said: “Saudi Arabia did not experience the downturn in the economy which the rest of the world experienced in 2007 onwards because of its oil revenue. It is now starting to spend that money.
“Massive construction projects for housing, facilities and infrastructure are underway.
“These are also being funded by private investors who have money stored away and would prefer to invest in bricks and mortar rather than banks which will not offer such attractive returns.
“Saudi Arabia is a land of opportunity when it comes to new real estate, especially as the government is quick to release permission for building projects and has made mortgages far easier to obtain – as borrowers can obtain cash using their homes as security.
“The Saudi population is young, 65% are under 25. Therefore the demand for new homes is enormous as people move away from their parents and start their own families. In the next five years it is expected to be up to a million new units. That is 200,000 a year.
“The supply side is much smaller and not able to cope. That is why we see developers getting into the market.”
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