REAL ESTATE

HOMEOWNERSHIP DRIVES SOARING SAUDI MORTGAGE MARKET

Saudi citizens’ dreams of owning their homes are coming ever closer. 

Last year, banks provided a record 289,257 new mortgages to individuals, a nearly 70% jump from 2019, according to Saudi Central Bank data.

Banks provided SAR 110.26 billion in mortgages for houses, an 87% increase compared to 2019, while loans for apartments stood at SAR 18.96 billion, an 86.5% expansion.

Mortgages for land for individuals stood at SAR 17.42 billion, a 32% increase from the previous year. All in, banks provided mortgages valued at SAR 136.2 billion in 2020, an 83% growth over 2019, SAMA data shows.

Mortgage financing activity was brisk throughout the year, except for April and May – the height of the pandemic. But June registered a record 893 mortgage loans, the highest in the year, as banks shrugged off the temporary lockdown and focused on the longer-term pent-up demand for residential real estate.

COMMERCIAL PROPERTY SECTOR

The commercial real estate sector was also robust last year, with real estate loans valued at SAR 428.4 billion outstanding in 2020, a 44% jump over the previous year.

Real estate loans in the retail space grew 59% to SAR 335.2 billion, while corporate rose 14% to SAR 113.2 billion.

Despite the slower economic activity and lockdowns in the kingdom due to COVID-19, the residential market saw 60,000 units being handed over in the key markets of Riyadh and Jeddah, according to real estate consultancy Jones Lang LaSalle.

“As the kingdom continues its drive towards increasing home ownership rates, further investment into the housing sector can be expected,” JLL said.

With most of the upcoming supply situated within masterplan developments rather than standalone projects, huge emphasis is being placed on delivering best-in-class customer experience through amenities, health and safety features, convenience stores, and communal spaces, the consultancy said.

This will be especially evident in Riyadh, which is expected to undergo a major transformation, focused on job creation, economic growth and investment.

The capital city could be home to around 15 to 20 million people by 2030, from around 7.5 million currently, according to Crown Prince Mohammed bin Salman, who noted that the city’s strong infrastructure will serve as a spring board for future growth.

‘’The cost of developing infrastructure and real estate is also 29% less than the other cities, while the infrastructure in Riyadh is already very well accomplished because of the sound management and planning performed by His Highness King Salman over a period of 55 years and more,’’ the Crown Prince said during a speech at the Future Investment Initiative in January. 

SECONDARY MORTGAGE MARKET

The jump in mortgages is in line with growing needs of an affluent and rising population, and is part of the government’s efforts to raise Saudi homeownership.

Demand for real estate financing in the kingdom is expected to increase from SAR 280 billion in 2017 to SAR 500 billion in 2026, according to the Public Investment Fund.

The Saudi Real Estate Refinance Company (SRC), a unit of the Public Investment Fund, also took advantage of low interest rates by raising a dual tenor SAR 4 billion (around USD 1.067 billion) sukuk.

The SRC was launched in 2017, with the mandate to refinance up to SAR 75 billion of the kingdom’s housing sector over the next five years, reaching SAR 170 billion by 2026.


The company’s latest Islamic bond offerings are part of the SAR 10 billion Saudi riyal sukuk programme under which SRC will issue sovereign-guaranteed Islamic bonds targeting local investors.

More than 30% of the issuance was subscribed by a mix of asset managers, pension fund, government funds, and insurance companies, and was oversubscribed 2.15 times.

“The successful sukuk issuance demonstrates confidence among the investor community and trust in a robust housing market in the kingdom and more broadly a resilient Saudi economy,” said Majed Al-Hogail, the minister of Municipal, Rural Affairs and Housing and chairman of SRC. 

“The favourable cost of funding for SRC ultimately translates to an ecosystem where mortgages are more affordable and accessible to Saudi families. The sukuk programme brings us one step closer to achieving the strategic objectives of the housing programme under Vision 2030.”

SRC’s sukuk programme will help with the development of a strong secondary mortgage market. “The latest sovereign-guaranteed offering, underpinned by favourable cost of funding and terms, will further provide liquidity to the Saudi housing market that helps our citizens climb the housing ladder,” said Fabrice Susini, CEO of SRC.

The bonds will help the company achieve its goal of being an intermediary access point for investors, aligning the liquidity, capital, and risk management requirements of real estate mortgage companies, with the risk acceptability and return on equity to meet investor targets. 

“It endeavours to create stability and growth in the kingdom’s housing sector by injecting liquidity into the secondary mortgage market, improving standards, and facilitating access to local and international financing sources,” PIF said.