Developers need to rethink Riyadh home affordability challenge
Gulf Prime Real Estates Choudhry Muzaffar analyses the positive developments and the challenges surrounding the Saudi capitals home property sector.
ZAWYA
February 28, 2013
28 February 2013 Riyadh's residential market has remained buoyant in 2012 due to a number of factors including growing demand from first-time home buyers, favorable urbanization trends and ongoing public sector efforts to develop infrastructure.
A recent survey conducted by Gulf Prime Real Estate (GPRE) revealed that approximately 27,700 residential building permits were issued in the Saudi capital in last year. Government initiatives such as the passage of the long awaited Mortgage Law in Q3 2012, as well as the recent publication of the Saudi Arabian Monetary Agencies (SAMA) draft regulations for review by the general public have helped to ease pent-up housing demand.
In the short term, affordability remains the central concern, especially since the influx of new construction supply concentrated in the northern areas will have average villa prices of over SAR 1.4 million.
To address this, two- to three-unit buildings have grown in favor, easing qualification requirements for financing of primary applicants and supported by the additional income stream from the units within the buildings. Many banks and financial institutions (mortgage and installment companies) continue to relax credit guidelines and profit rates as competition for market share increases.
