JEDDAH: The affordable housing segment in Saudi Arabia is forecast to widen amid rapidly growing population and increasing number of married couples in search of affordable entry-level housing, RNCOS said Saturday in its latest report “Saudi Arabia Housing Sector Outlook”. Housing industry in the Kingdom has emerged as the most dynamic segment of the real estate industry, the report said. The industry is witnessing unprecedented growth for the past few years, specifically affordable housing market. Although the industry saw some serious setbacks in 2008 due to weak market sentiments, it has experienced significant improvement in demand during 2009 and is expected that the industry will grow at a CAGR of over 18 percent during 2010-2013. The expected annual housing demand for the next three years is based on the correlation between past market growth and base drivers, such as household size, government support, and growth in the population. However, the report noted that although the Kingdom is witnessing huge developments in the housing construction segment, housing market still suffers from large demand-supply gap. Nonetheless, increasing government support and the introduction of mortgage law are expected to propel the stupendous growth of the housing industry in near future. “Until they formulate a mortgage law, there will be a limited number of players in the market with limited capital to invest,” said Paul Loiacono, the chief operating officer at Deutsche Gulf Finance (DGF) in a published report. DGF, a partnership between Deutsche Bank and a group of Saudi investors, started offering Sharia-compliant mortgages this year. Typically, such mortgages are structured like leases, with buyers paying annual fees. More than anything, the new laws will provide a structure for new companies to enter the market with confidence that the courts will support their contracts, Loiacono said. “With the mortgage laws you will see more competitors come in, and the competition will force them to reach new markets,” he added. Industry analysts said only about 30 percent of Saudi households own their homes. If the market regulations are approved in the next few months, as expected, the pent-up demand for housing could create a $32 billion a year lending business, according to Capitas Group International (CGI). To satisfy demand, more than 150,000 homes a year will have to be built in the next 10 years, CGI estimates. Most of the demand will come from low and middle-income families, analysts say. Fifty percent of Saudi housing demand is expected to come from low-income families that typically make less than SR60,000 a year.
