HOME BUYERS DRIVE Q1 MORTGAGE APPLICATIONS IN SAUDI

More and more Saudis are coming closer to their dreams of owning a house as new residential mortgages for individuals, offered by banks and financial services companies, jumped more than three times in the first quarter of 2019 compared to the same period last year, according to the Saudi Arabian Monetary Authority (SAMA).

Contracts for residential mortgage for individuals, during the quarter reached 31,462 with value at SAR 15 billion.

"The performance of real estate loans for individuals during the first quarter of 2019 has achieved a new upward trend. The total amount of financing in the first quarter is near to what has been offered in 2017," SAMA said.

"It is also equal to the number of contracts achieved in the first three quarters of 2018. This quarter is almost three times the number of contracts in the first quarter of 2018, and more than the double of the amount of funding for the same quarter of last year."

The number of new residential mortgage contracts offered by commercial banks and finance companies reached 12,148 in March 2019, registering a growth rate of 206% compared to March 2018. The total value of contracts reached SAR 5.5 billion, an increase of 114%, year on year.

Similarly, the number of contracts subsidised by the government, through the housing support programmes provided by the Ministry of Housing and the Real Estate Development Fund, stood at 10,364 contracts valued at SAR 4.4 billion in March 2019, compared to SAR 3.6 billion in February of the same year.

The Ministry of Housing also recently launched a programme that provides housing options for citizens, including facilitating finance, in a bid to raise housing ownership rate to 70% by 2030.

The new figures outperformed last year’s, when real estate financing grew by 10% to reach SAR 16.1 billion. Real estate and non-real estate accounted for 34% and 66%, respectively, of total finance companies credit, according to SAMA’s Financial Stability Report.

The figures may climb further as the kingdom’s Council of Ministers approved in May the creation of a residency permit scheme for qualified international expatriates as part of an effort to attract global entrepreneurs, innovators and investors.

“Our aim is to attract innovators from across the world to live and work in Saudi Arabia – and this reform will play a significant role in doing so,” said Ibrahim Al Omar, governor of the Saudi Arabian General Investment Authority (SAGIA). “These investors and entrepreneurs will help to drive the private sector growth, which is needed to realise the ambitious goals set out in Saudi Vision 2030.”

The residency permit will enable international expatriates in Saudi Arabia to gain access to a range of privileges alongside their residency, including allocating visas for their families and enabling them to own real estate in the kingdom, according to SAGIA. There will be two separate forms of the programme, one acting as a permanent residence permit, and another that is renewable on an annual basis.

Saudi real estate price index declined 4.9% in the first quarter, compared to the same period last year, according to the Saudi General Authority for Statistics. Residential villa prices fell 4.6%, and apartments dropped 2.7%, while the value of commercial plots were down 3.1%.

Management consultancy KPMG noted that despite the current slowdown in Riyadh, and subdued performance during the last couple of years, the demand for housing units is continuously increasing, mainly driven by a large and growing population, coupled with increasing urbanisation and declining household size.

“It is critical to note that the demand is mainly increasing for the affordable housing segment, whereas the supply is predominantly rising in the luxury or high-end segment,” KPMG said in a report.

“Hence, there exists a mismatch among the residential segment, as the demand is not being catered by offering more affordable housing units. Therefore, the MoH (Ministry of Housing) is targeting to bridge this gap through the development of more affordable housing projects.”

Jeddah and the surrounding area also offer similar growth dynamics, said KPMG, noting that the semi-gated complexes such as J One and Diyar Al Salam Residence are gaining favour among tenants and would-be home owners. They are currently enjoying healthy occupancy rates.

“We further expect the delivery of such developments in the short to medium term,” KPMG added.