By Gavin Gibbon
Fabrice Susini, CEO of Saudi Real Estate Refinance Company does not expect surge in defaults despite economic crisis
The mortgage market in Saudi Arabia is already showing signs of recovery after taking a hit during the Covid-19 lockdown and movement restrictions, and Fabrice Susini, CEO of Saudi Real Estate Refinance Company believes it could be back to pre-pandemic levels by the end of the year.
Susini told Arabian Business that the relatively underserved sector in the kingdom – there are 200,000 mortgages issued in a population of over 30 million - had been experiencing rapid growth, increasing from around 5-6,000 loans-per-month in Q1 2019, to around 22,000 by the end of March this year.
In monetary terms, he said that equated to SAR150 billion worth of mortgages by the end of the first quarter in 2019, compared to SAR225bn in Q1 2020.
“It decreased to around 15-17,000 in March and April. It’s a significant drop, but it’s far above what was produced one year or one year-and-a-half ago,” said Susini.
Saudi Arabia’s government has been focused on increasing the level of home ownership to 60 percent by the end of 2020, through its Sakani programme, with a goal of 70 percent by the end of 2030.
Despite the twin shocks of the Covid-19 global pandemic and the drop in international oil prices, Susini is confident that the mortgage market in the country will remain resilient as a result of the stimulus measures previously announced and the pent-up demand from an increasingly young consumer base.
“Expectations are not for a significant dive or drop in the market,” he said.
Susini said he is also confident that the current economic conditions would not result in an increase in defaults.
He said: “There is a lot of stimulus that has been injected by the Ministry of Finance and SAMA (Saudi Arabian Monetary Authority), either through the banks or financial institutions to support the economic activity, especially the private sector and the SMEs, because the risk you have for us, the main risk in terms of delinquency and default, is unemployment (unemployment rate at Q1 stood at 5.7 percent).
“We can see some delinquencies picking up. With all the support that is provided to the system, we may see some delinquency keeping on, we may see some default coming up. We looked at different scenarios, but I think it will remain relatively limited and controlled, subject to the macro-economic environment.
“If you just look at the effect of the past two or three months, will it translate in a big surge, a tsunami of defaults, if it remains like that, no.”