By Ahmed Alkhoshaibi
Predictions For 2020: Why 2020 will be a turning point for Saudi Arabia's housing market.
While most people would agree that 2019 was not a vintage year for property in the Gulf, there is one GCC market where I believe the prospects for real estate in 2020 look brighter than ever. Everyone knows about NEOM, the futuristic city in the north-west of the country, as well as Qiddiya and Diriyah Gate, both of which are located close to Riyadh. These are just three of the many projects that have been announced in recent years. In 2020, there are sure to be a raft of new contracts awarded at these projects, which will give a significant boost to the local construction industry.
But while these giga-projects have understandably earned all the headlines, I would argue that even more important work is going on in the background. The Kingdom of Saudi Arabia has set ambitious targets for housing, particularly with regards to finding homes for middle and lower income families. This is a colossal challenge, given not only the geographical size of the country, but also its rapidly growing population, which now stands at over 30 million people.
How big is this challenge? To put it into context, at the time that Saudi Arabia’s Vision 2030 plan was launched, cumulative demand for housing among Saudi nationals had risen to 1.45 million, with 325,000 units required for Riyadh alone. Simply meeting that level of demand is hard enough, but the Housing Program portion of the Vision 2030 plan has some additional near-term targets that include bringing Saudi home ownership rates from 50 percent in 2016 to 60 percent in 2020, and bringing down the average home price from almost 10 times the average annual income per person to five times.
Yet despite the obstacles, the Ministry of Housing - led by HE Majid Al Hugail - is clearly up to the challenge, with the helpful backing of the kingdom’s central bank, the Saudi Arabian Monetary Authority (SAMA), the Real Estate Development Fund (REDF), and Saudi Real Estate Refinance Company.
In recent months, officials from the Ministry have been working harder than ever to allocate plots of land in an attempt to address this issue. In October alone, almost 21,000 pieces of land – a new record – were handed out as part of the Ministry’s Sakani programme. Also in October, the total value of mortgages from banks and finance companies rose by 172 percent compared to the same month in 2018. These figures give a good idea of both the size of the Ministry’s task and the success it is already achieving.
In December, the Ministry went a step further and announced that it would provide 100,000 new homes in 2020, at a total value of $17.3bn. Given the results it has achieved so far, I am certain that the government can meet this challenge. However, while the government has clearly led the way in this issue, I believe that it is now time for the private sector to also stand up and be counted.
This is why 2020 will also be the year that Arada launches its first project in the Kingdom of Saudi Arabia. We believe that the need for the kind of communities that we are already building in Sharjah has never been greater. After all, great communities don’t just provide a place for people to live. Fully integrated communities also provide jobs, including construction, healthcare, services, education, retail, hospitality, commerce, and leisure. New communities help to boost consumer spending, improve infrastructure and enhance social inclusion. As a result of this (and more), they are a substantial contributor to economic growth.
"It is now time for the private sector to stand up and be counted"
One of the key pillars of Vision 2030 is an open, thriving economy, diversified and which creates jobs for all Saudis. Specific goals include raising the share of non-oil GDP from 16 to 50 percent and increasing the private sector’s share of GDP from 40 to 65 percent. We believe that thriving communities can contribute substantially to these goals.
Saudi Arabia is at the cusp of perhaps the most important period of growth in its history. The reality is that Saudis want what everyone else wants: a secure, happy and healthy place for their families to grow, at a price they can afford.
In 2020, Arada will be focused on giving Saudi Arabia’s people exactly that.