Mushtak Parker Saudi Gazette LONDON – The annual demand in Saudi Arabia will rise from an estimated 195,000 housing units in 2011 to 230,000 units in 2015 to 264,000 units by 2020. To meet this demand housing expenditure needs to reach a total of SAR 1.3 trillion through 2020, said Nasser Nubani, Executive Vice President & General Counsel, Capitas Group International (CGI). However, the current average price of SR1 million of a housing unit in Saudi Arabia is not affordable for many Saudis, Nubani said, warning that this price has to come down to a more realistic SR750,000. Nubani, who is based in Jeddah was speaking at the International Real Estate Forum (IREF) 2013 held last week in London. He stressed that the Saudi Arabian market is characterized by a severe shortage of housing, and the market is in pressing need for home ownership. Currently homeownership in the Kingdom stands close to 40 percent, with the rest of the market accounting for rented accommodation. The housing loans to GDP ratio for the Middle East and North Africa (MENA) region is about 8 percent compared with 14 percent for the East Asia and the Pacific Region and 53 percent for the High Income Organization for Economic Co-operation and Development (OECD) countries. The mortgage market in the MENA Region is estimated at a mere $100 billion, which is modest by UK, US and European standards. Nubani identified four key growth stages as the foundation for mortgage financing, which he asserts must be methodically developed. The first stage is to ensure that basic mortgage related services (e.g. title, property registration) are in place. Legal and regulatory standards also need to be established The second stage is the availability of banks and independent financiers to increase lending activity to spur housing development and to create a mortgage sector. The third stage will see banks and financial institutions mature as a result of their lending experience. They will begin to access multiple sources of capital (e.g. secondary market). This would also lead to the development of mortgage securitization to unleash further liquidity which in turn would make more money available for both housing development and financing. The fourth stage will see a steady flow of mortgage assets sold to an expanded base of investors, thus increasing the product options and lowering costs. Real estate prices in several Gulf Cooperation Council (GCC) countries were driven by speculation and have only recently stabilized, but according to Nubani, Saudi Arabia is a notable exception due to a genuine supply-demand gap.
