Saudi Arabia faces a housing shortfall of up to 50,000 residential units and needs to build around 160,000 new units a year to meet strong demand being driven by population growth and shrinking household sizes, EFG-Hermes said on Wednesday. The Egyptian investment bank said it expected demand to increase further if the kingdom's much-delayed mortgage law is passed, due to come into effect this year. The passing of the mortgage law and factors such as rising oil prices will likely push property prices higher, EFG warned. “We believe prices have been fairly stable over the past year, but we expect them to start to increase again in 2010 and 2011, particularly if liquidity comes back to the market either through higher oil prices, stock market performance or mortgages,” it said in a report. EFG said the largest potential for growth is in the middle- and low-income housing segment. Middle-income households make up around 25 percent of the population, the bank said. The segment suffers the most acute undersupply as many developers have focused on building high-end developments, while the lack of a mortgage law has limited middle- and low-income households' access to financing. EFG said developers Dar Al-Arkan and Akaria are best placed to benefit from the introduction of the mortgage law due to their focus on the middle-income segment of the population. Saudi Arabia's population, which currently stands at around 25 million, is expected to grow by 8 million to 33 million in 2020, according to the Saudi Department of Economy and Planning. Saudi Arabia has emerged as one of the favored destinations for real estate developers to tap unexplored opportunities in housing construction sector, the new report titled “Saudi Arabia Housing Sector Outlook - 2009 Edition” said. At present the Kingdom is facing massive shortage of housing units because of huge demand-supply gap. Rising population coupled with declining household size has been fuelling the demand of housing units in the country. Saudi housing construction industry is poised for tremendous growth ahead in the backdrop of several factors that have been discussed in the report in detail. Data from the Ministry of Economy and Planning's 8th Development Plan (2005-2009) said there is shortage of nearly 0.73 million housing units in the Kingdom besides the unmet housing demand of 0.27 million housing units by the end of 7th Development Plan. “We expect this demand to double by 2015, driven by changing industry landscape and favorable policy framework.” “We don't foresee any impact of global financial crisis on Saudi housing industry in near future. The demand levels within the industry will remain intact due to massive shortage in affordable housing segment. In fact we have found that housing construction industry is expected to overtake other sectors in terms of contribution to GDP growth in the coming few years,” the report added. Separately, a round table discussion on “Sustainability and the Green Agenda” as part of the City Leaders Forum, launched at Cityscape Dubai 2009, brought together leaders from major cities in both developed and emerging markets in a dynamic forum that promoted networking, lively discussion and information exchange. Participation in the closed-door event was by invitation only and was attended by top tier decision-makers from some of the world's leading cities and regional authorities including Saudi Arabia, UAE, China, Hong Kong, Vietnam, Malaysia, France and Norway. The Forum also provided an interactive platform connecting major global destinations in an open dialogue to share best practice models and strategies for sustainable urban development as well as social, economic and environmental growth. “It was an honor to be selected to lead such a prestigious group of innovators,” said Tore Braate, president of the International Real Estate Federation, FIABCI, Multinational Chapter of Scandinavian Countries, who was recently selected among global world leaders to moderate. During the discussion delegates shared their perspectives on existing green efforts within their individual countries and developed a sustainable green strategy that would take advantage and employ resources available to various countries.
