SAUDI MORTGAGE MARKET BACK INTO ACTION

The number of mortgage contracts in Saudi Arabia crossed 102,351 in the first five months of the year, valued at SAR 45.7 billion, according to the Saudi Arabian Monetary Authority’s latest report.

The kingdom’s banks offered loans for 45,712 houses, 8,717 apartments and 2,191 pieces of land, the survey noted.

Saudi banks had issued 170,275 new mortgage contracts in 2019, more than triple the 46,885 contracts issued in 2018. By the end of 2020, the kingdom aims to increase total outstanding mortgages to SAR 502 billion from SAR 300 billion in 2018.

The urban cities of Riyadh and Jeddah also saw new residential units come on line, in more signs that the country’s key urban real estate markets are rebounding.

Riyadh saw as many as 7,500 new units completed in the first quarter of the year, taking the total stock to 1.3 million, according to real estate consultant Jones Lang La Salle (JLL).

Jeddah witnessed 1,800 new units coming into the market, taking its residential stock to 827,000.

“The delivery of residential units in both Riyadh and Jeddah remains active, as the government continues its drive towards increasing homeownership in the kingdom to 60% by 2020 and 70% by 2030,” according to JLL, noting that the property market activity appears to be bottoming out in both cities.

Cavendish Maxwell, another real estate consultancy, estimates real estate prices to have risen 2.1% on average in the first quarter across the country. Plots saw a 2.1% jump, while apartments rose 2.2%. However, villas dipped 2.6% during the period.

“A number of initiatives have been launched to achieve this goal including incentivising developers to increase affordable housing offerings and making private sector financing more accessible. Measures already in place included lowering mortgage down payments from 10% to 5% and increasing banks’ loan-to-value ratio for mortgages of first-time homebuyers from 85% to 90%,” according to a new report by Cavendish Maxwell.

Saudi Arabia is also upgrading the regulations to bolster the real estate sector. In July, the kingdom rolled out a new attestation system for all real estate investments to safeguard buyers’ interest.

“The documentation system will help with ‘preventive justice’, which will contribute to reducing disputes and lawsuits, raise the efficiency of contracts, and enhance the speed of restoring owners’ rights without the need to file a lawsuit,” according to Dr. Walid Al Samaani, Saudi minister of justice and chairman of the Supreme Judicial Council, as reported by the media.

The government has also taken measures to ensure the housing market remains stable. The Real Estate Development Fund said it deposited SAR 1.05 billion in citizens' accounts benefiting from Sakani Program in April.

The Sakani housing programme provides financing options to enable home ownership to thousands of Saudi citizens in the kingdom.

The Red Sea project, a major real estate, tourism and business hub on the kingdom’s west coast, awarded a landmark contract in July for airside infrastructure works for the destination’s international airport, set to open in 2022.

Saudi contractors Nesma & Partners Contracting Co. Ltd and Almabani General Contractors won the award as the government aims to create jobs and economic activity within the country. In line with its sustainability goals, the project’s entire infrastructure, including its transportation network, will be powered completely by renewable energy.

Earlier this year, the company said it deployed hi-tech survey equipment and drones to map the most efficient sites for its property assets on the water.

“This activity informs the positioning of overwater assets, including villas, restaurants and hotel arrival points for two hyper-luxury hotels and one luxury hotel on Sheybarah South and Ummahat Al Shaykh islands,” the company said. “It marked the location of the assets in accordance with the destination’s approved Master Plan and took around three weeks to conduct.”

Work is also under way on the massive SAR 500 billion NEOM project on the northwest coast of Saudi Arabia.

In May, the National Program for Community Development in the Regions, or TANMIHA, began disbursing financial compensations for the owners of real estate within the first phase of the NEOM in Sharma, Qayal, Al-Kheraiba, Al-Aseelah, Al-Soura, and Bir Fehiman areas.

The massive real estate and tourism project is also putting in place the infrastructure to create a sustainable living environment, with a USD 5 billion deal to create the world’s largest renewable hydrogen project.

US-based Air Products, in collaboration with ACWA Power and NEOM, said they will be collaborating to produce 650 tonnes per day of hydrogen by electrolysis using Thyssenkrupp technology; produce nitrogen by air separation using Air Products technology; and produce 1.2 million tonnes per year of green ammonia using Haldor Topsoe technology. The project is expected to be completed by 2025.

“Harnessing the unique profile of NEOM’s sun and wind to convert water to hydrogen, this project will yield a totally clean source of energy on a massive scale and will save the world over three million tonnes of CO2 emissions annually and eliminate smog-forming emissions and other pollutants from the equivalent of over 700,000 cars,” said Seifi Ghasemi, chairman, president and chief executive officer for Air Products.

The turnaround in the kingdom’s real estate and construction sector and focus on giga projects will play a key role in reviving the economy and creating new jobs.