HOUSING SCHEME LAYS GROUNDWORK FOR SAUDI PROPERTY BOOM
Saudi Arabia is in the midst of a massive housing construction wave driven by the government’s Housing Program.
A key pillar of the Saudi Vision 2030 initiative, the Housing Program under the Vision Realization Program (VRP) is an important measure of citizen sentiment. Like residents across the world, Saudis see their homes as a sanctuary, a place to raise their families, and a way to accumulate wealth.
The programme aims to increase home ownership rate from 47% in 2017 to 70% by 2030 for a growing population with rising affluence. It also aims to reduce waiting periods from 15 years to a much shorter timeframe. In 2017, more than 1.6 million Saudi nationals were on waiting lists for government housing programmes.
Management consultancy PricewaterhouseCoopers estimates the kingdom will need to create approximately 1.2 million new homes to reach a stock of 4.96 million houses by 2030. Housing demand is expected to increase from 99,600 in 2021 to 153,000 by 2030 with an average of 124,000 houses over the period.
“The Kingdom of Saudi Arabia has made remarkable progress in transforming its housing sector in the past decade,” PwC said. “It is predicted to achieve its objectives of 70% home ownership, and a housing sector that contributes 8.8% of national GDP, by 2030. The Government’s robust policies and initiatives, including the activation of numerous finance products, is propelling the sector forward, addressing the key challenges faced by the housing market, and making home ownership a possibility for new generations of Saudis.”
EARLY SUCCESSES
The VRP has already notched up a few wins in its first phase covering 2016 to 2020.
The government established the National Housing Company (NHC) and Real Estate General Authority (REGA) to address gaps in housing supply and regulation, respectively, while a host of supporting entities were formed to tackle a variety of disputes and challenges in the market from licensing bureaucracy and developer financing to the adoption of progressive building technologies. Taken together, this ecosystem is a powerful tool.
As reforms and construction gained momentum, the percentage of Saudis who own a home rose from 47% to 60% by 2020. The government also abolished waiting time for housing through the Sakani platform, which provided housing and financing solutions to 834,00 families, including 310,000 families who now live in their own homes.
The VRP has also provided more than 46,000 houses for families most in need, in partnership with non-profit sector and more than 350 associations.
In addition, the program has collaborated with 14 private sector developers to build new houses, and partnered with banks and financing institutions to provide 424,000 subsidised real estate loans to citizens.
In other reforms, the Ejar platform offers protection and enforces rights of lessors, lessee and real estate brokers in the rental market. This helped the number of documented contracts reach more than 1.4 million.
DELIVERY PLAN
While the first phase helped lay the foundation of the massive strategy, the second phase under the 2021-25 plan aims to take a giant leap to build out housing infrastructure. Strategy 2025 focuses on four key objectives.
The first is housing affordability to ensure Saudis have access to homes that suit their needs. The second is housing market maturity, which aims to ease doing business and lending scale in the market. A third key objective is to provide housing for the vulnerable segment of the population, and the final objective is to ensure a strong family ownership in the kingdom that is comparable to advanced economies.
The second phase offers these commitments and aims to achieve key
targets, such as:
• subsidise 355,000 real estate financing contracts within five years;
• provide 40,000 developmental housing units;
• achieve 80% citizen satisfaction rate with the housing programme in 2025;
• regulate the market by setting regulations, enabling the private sector, and strengthening the housing sector ecosystem;
• cumulatively contribute to the GDP amounting to SAR 157 billion;
and
• create more than 38,000 direct jobs for Saudis.
The VRP identifies housing maturity as one of the areas it needs to strengthen during the current phase, noting that the supply-side of the market still has not reached the required maturity level to achieve the programme’s ambitions due to lower productivity versus size of demand.
“Addressing these pain points adequately is critical to maturing the supply-side of the market, which will contribute to a more affordable market through lower prices for houses desired by the kingdom’s residents. This requires a complete redefinition of the Housing Program’s support to the supply-side of the housing market,” the VRP
noted.
Expect the government to continue to tweak, restructure and review the housing market as it moves forward into the second and third phases of the initiative, which starts in 2026 and as it aims to reach its 2030 targets.
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