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Sun 19 Dec 2010 10:30 AM

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15% of Saudi housing vacant as buyers priced out of market

Available real estate is ‘far beyond’ purchasing power of majority of the population - study

15% of Saudi housing vacant as buyers priced out of market
Up to 15 percent of Saudi Arabia’s housing units, said consultancy RNCOS

Up to 15
percent of Saudi Arabia’s housing units are lying vacant despite soaring demand
as a generation of homebuyers are priced out of the market, a report has found.

Unmet
housing demand has reached the 270,000 mark, yet first-time buyers remain
locked out of the market by soaring real estate prices, said consultancy RNCOS.

“Available supply is far beyond the
purchasing power of large segments of the population,” the India-based firm
said in a report.

“[Government data shows] accumulated unmet housing
demand stood at 270,000 units. Yet of total available housing units, there was
as much as 12-15 percent vacant.”

The cost of a mortgage typically
represents 41 percent of monthly income for young buyers, the company said.

Saudi Arabia, the Gulf’s largest economy, requires some 1.5 million units by 2013 to keep
pace with its burgeoning population, of which 70 percent is under the age of
30.

Affordable
housing demand accounts for more than 90 percent of total housing needs, but a
lack of financing means would-be buyers are struggling to get a foot on the ladder.

“The
housing market is closely balanced, but there’s huge demand every year that
needs to be made up. I think the way that the market is working at the moment
is that there are a lot of people who would like to own a house, but don’t have
the financial capacity to do so,” John Harris, director of Jones Lang LaSalle
(JLL), Middle East said.

 “There’s a lot
of housing, but it’s all rented housing. There’s a shortage of financial
capacity for ownership.”

Land
prices in certain suburban areas have risen by up to 40 percent in the last
year, Harris said.

“We’ve
certainly heard stories of land values in the suburbs increasing from say, SR300
per square meter to SR400 or SR500 in the last year.”

In an
attempt to address the shortage in financing, Saudi Arabia’s government has
introduced real estate soft loans provided by the Real Estate Development Fund
(REDF) to low income citizens.

“However,
the gap between the number of applications submitted and loans given is
widening,” said Shushmul Maheshwari, chief executive of RNCOS.

The state
is also expected to introduce its long-awaited mortgage law in the first half
of 2011, and is in the process of legalising off-plan real estate sales.

“I
think the great benefit of the proposed mortgage laws would be to enable more
wholesale capital and secondary markets, which could have the benefit of
reducing the cost of funds to the consumer and that could make homeownership,
with bank funding, more affordable to families,” said Harris.

 

Simon 8 years ago

Same as Dubai...China, Qatar and soon to be Brazil.