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Wed 21 Oct 2009 01:51 PM

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Saudi house prices set to rise over next two years

Demand set to rise amid growing population and recovering economy - EFG Hermes.

House prices in Saudi Arabia will rise in the next two years as its rising population continues to up demand and the economy recovers from a drop in oil prices, Egyptian investment bank EFG Hermes said.

Saudi Arabia will have an annual demand of 160,000 new units each year and up to 50,000 units, EFG said in a report.

"We believe prices have been fairly stable over the past year, but we expect them to start to increase again in 2010 and 2011, particularly if liquidity comes back to the market either through higher oil prices, stock market performance or mortgages," the bank said.

Saudi Arabia's growing population has risen to over 25 million, according to government estimates, posing a challenge to the government in terms of providing jobs and housing.

A proposed mortgage law would further drive demand in the kingdom.

"If the mortgage law is passed, we expect demand will increase significantly as mortgages will allow more people to access the housing market," it said.

While all real estate companies will benefit from the passage of the mortgage law, EFG said that Dar Al-Arkan and Saudi Real Estate Company (Akaria) will see the most benefit due to their residential focus. (Reuters)