 Government financing programs boost the purchasing power of homebuyers
 The licensing of 8 financial institutions is a positive indicator of the real estate sector’s growth
 The Saudi market will transform into an attractive regional and global market for real estate investments
 Experts: Low affordability and land scarcity are the main obstacles
 Need to establish a comprehensive database that identifies actual supply and demand in the real estate market
 The real estate sector has established itself as a key driver of economic and social development
 The Saudi real estate market retains competitive advantages over other countries in the region, most notably strong growth
 Written by: Ahmed Al-Shimi – Exclusive – Amlak

The British newspaper *Daily Mail* reported that the Saudi market is poised for an upcoming real estate boom, thanks to positive steps taken by the government to provide more mortgage financing options, thereby enabling a larger number of citizens to purchase homes.
The newspaper praised the Saudi Arabian Monetary Authority (SAMA) for granting eight financial institutions the necessary licenses to engage in real estate financing activities, emphasizing that this step will bring about a qualitative leap in the real estate market. It noted that the operation of these institutions alongside banks sends a positive signal that the real estate sector is moving in the right direction.

The Real Estate Market
The British newspaper *Daily Mail* noted that this step would address the problem of liquidity shortages among buyers in the real estate sector, which had previously dashed the hopes of many citizens of obtaining suitable housing, and that this step confirms that mortgage systems are operating smoothly and effectively, and that efforts to regulate the real estate market are in full swing.
Experts emphasized that regulating the real estate market was among the most vital foundations for revitalizing the real estate sector and eliminating haphazard financing—an issue the government has addressed through these decisions. They stressed the need for the government to prioritize, in the coming period, the creation of a comprehensive real estate database, that accurately reflects the levels of supply and demand in order to address the housing problem on multiple fronts, in conjunction with the Ministry of Housing’s projects.
There is no doubt that the Kingdom needs more housing, and that land outside urban areas must be developed to keep pace with high demand—driven by a number of factors, most notably demographics and population growth, which recently reached 30 million, and is expected to increase by another 7 million by 2020. This necessitates that the government and institutions operating in the real estate sector focus on low- and middle-income groups, especially since these groups represent the largest segment of housing seekers.
3 Million Housing Units
International organizations estimate that the Kingdom needs $400 billion in financing to build 3 million housing units in the coming years, however, there are a number of factors that will help alleviate the housing problem, chief among them rising income levels and gross domestic product (GDP), a growing workforce, and diversification of funding sources—all of which have a direct impact on the real estate sector.
The Business Oxford Group, an international organization specializing in economic consulting, notes that the biggest problem facing the Kingdom’s real estate market is weak long-term affordability, as this ratio (average income to average home price) stands at 7.6 % in the Kingdom, whereas in the United States and some European countries it is 3.4%, Consequently, the government is working hard to compensate for this lack of affordability among a vast segment of citizens seeking housing, and various financing programs have been introduced to address this problem.
Demand for Housing
The Foundation added in its report that the land market is part of the problem of low affordability, as in the wake of the financial crisis that hit global markets in 2008, a large number of investors poured massive amounts of capital into purchasing land with no intention of selling it. Consequently, land prices have risen by varying percentages over the past few years, ranging from 30 to 60%, Consequently, the availability of developed land greatly assists real estate developers.
Demand for housing is expected to rise from 195,000 units this year (2014) to 265,000 units in 2020, and consequently, the Saudi market will transform into an attractive regional and global market for real estate investments, capable of absorbing more international capital.
Advantages of the Real Estate Market
The Kingdom’s real estate market retains a number of advantages compared to those in other countries in the Middle East and the Arabian Gulf, the most important of which is that it is the fastest-growing and most expansive. Furthermore, the government pays it great attention, as clearly demonstrated by the package of laws and regulations designed to keep pace with high demand, which increase the purchasing power of homebuyers. This is in addition to the strength of the economy and the enormous financial returns from the oil sector, which the government seeks to leverage to develop practical and fundamental solutions to the housing problem.
The newspaper concludes its report by stating that the real estate sector has established itself as a key contributor to Saudi Arabia’s economic and social development and a major driver of a number of other economic activities, and that its ability to maintain strong growth rates will ensure a thriving market for years to come.