03 April 2011
Everyone knows there is a housing shortage in Saudi Arabia, and the lack of a clear mortgage law is hindering growth, but what are the other dynamics impacting on Saudi real estate?
Here is a handy and detailed list of interesting, and some troubling, facts you may or may not know about Saudi real estate.

1. Saudi Arabia has many sub-segments within its real estate industry with their own dynamics, which can be broadly divided into Riyadh, Jeddah, the Holy cities, Eastern province and City developments.

2. Estimates of the supply shortage vary, but Banque Saudi Fransi (BSF) places the current shortage at half a million, crossing one million by 2012. Currently, the stock of housing stands at 3.95 million, with new supply coming in at 380,000 per year.

3. The Saudi population dynamic deserves research of its own, but suffice is to say that its population is anywhere between 22 million to 25 million and has been growing at an annual rate of 2.1% in the past six years. "National population growth remained rapid through the 1990s, during which it averaged 2.8 percent per year. As a result, around 30 percent of Saudis are aged between 15 and 29," writes Jeddah-based Jadwa Investments. "This generation is now entering the labor force and the creation of suitable jobs is one of the main challenges the Kingdom faces."

4. BSF estimates that developers will have to build 275,000 units a year till 2015 for a total of 1.65-million homes.

5. Global Investment House estimates there are currently 4.815 million housing stock with a vacancy rate of 1.8%.

6. Saudi Arabia's King Abdullah Bin Abdulaziz bin Saud has unveiled a SAR250-billion plan to develop 500,000 housing units, which is one of two royal orders focused on housing. [read Saudi King's 21 Royal Orders].

7. But analysts expect a time lag, especially as the country's capacity is around 120,000 per units per year, according Kuwait-based Global Investment House.

8. The king second royal decree focused on raising the amount of the upper limit of the loan by Real Estate Development Fund from SR300,000 to SR500,000. This proposed limit should not negatively affect the number of beneficiaries of the fund's loans.

9. Of course, building houses on such a scale will require time to tender, design and execute the projects, and also include the involvement of other ministries including infrastructure development such as power, telephone lines and roads etc.

10. Saudi Arabia will need to complete 900 houses per day over the next five years to meet demand, according to real estate consultants Jones Lang La Salle (JLL).

11. Current developments are usually at a micro level, with less than five units per project. Building large-scale expertise could benefit the handful of large Saudi developers and other regional players like Arabtec, Orascom Construction, CCC and Drake & Scull.

12. Seventy per cent of current supply is focused on 10% of the population.

13. Saudi families are large and extended with multiple generations living together. Hence they need large accommodation. Even the family sizes have shrunk over the decades, they still remain large. Hence, two to three bedroom apartments are not ideal, villas and low-rises are favoured by Saudi nationals.

14. The housing sector in Riyadh and Jeddah is witnessing a rise in rents, making housing expensive for majority of the population. Samba estimates that rents in Saudi Arabia are rising by 9% per annum. In Riyadh rents for apartments rose 10% and 5% for villas.