Experts on the Saudi economy have confirmed that the housing sector will not be affected by next year’s cuts in government spending, as stated by Finance Minister Dr. Ibrahim Al-Assaf, in which he emphasized that next year’s cuts to government spending will apply only to non-essential items or those that can be postponed. This has led analysts and economic observers to rule out any impact on the housing sector from these policies, as they consider housing to be a fundamental and vital need in the country, and that the state’s strategic policy places the provision of housing among its top priorities, just like health and education. This was affirmed by the Custodian of the Two Holy Mosques, King Salman bin Abdulaziz, in his first speech after assuming the throne.
Real Estate Sector Growth Forecasts
As a result of this anticipated policy, the real estate market—particularly the residential sector—is expected to witness significant activity and a substantial influx of capital from both the government and the private sector, which means a recovery in the sector’s economy; consequently, the construction and building materials markets will also rebound to offset the prolonged slump that has plagued the market. Experts themselves confirm that the past few weeks have seen some activity in key segments of the real estate market, following intensified efforts by real estate development companies to complete new housing projects. They affirm that the sector’s stagnation is steadily receding until the housing crisis is resolved—even if only partially—after which the market will resume its usual activity as it was in the past. At the same time, real estate development companies are awaiting new measures expected from the Ministry of Housing to streamline licensing and construction procedures, in coordination with a number of government agencies involved in licensing or documentation.
2016: The Year of Real Estate Boom
Analysts note that the Ministry of Housing is currently focused on providing housing for poor and low-income families; at the same time, this belief is reinforced by the allocation of 250 billion riyals to build 500,000 housing units as part of the solution to the housing crisis. They expect the real estate market to expand further next year (2016), particularly in the residential sector, and for infrastructure to develop at a faster pace, while the office and retail segments will see very limited growth, emphasizing an increase in private-sector investment, specifically in the form of public-private partnerships to complete government housing projects. These predictions and indications are supported by the real estate landscape, which has seen a clear lull in land transactions, which has caused speculation to subside in many cases and locations. This has turned the current situation into a golden opportunity for expansion in housing construction, at a time when the building materials sector is experiencing a clear decline in demand for its products, particularly the basic ones.
1.25 million housing units
Statistics from the Ministry of Economy and Planning indicate that the Makkah region tops the list of areas with the highest demand for housing units, with 370,000 units covering an area of 103 million square meters, followed by the Riyadh region with 325,000 units covering an area of 91 million square meters, then the Eastern Province with 166,300 units covering an area of 43.5 million square meters, followed by Asir with 83,000 units covering an area of 23.27 million square meters, and then Madinah with 81,200 units covering an area of 22.6 million square meters. The total number of residential units in demand reached 1,250,000, with a total estimated area of 350 million square meters.
