JEDDAH: Saudi Arabia's housing market continues to wrestle with a shortage of supply and mounting demand, which has placed home ownership affordability out of reach for many young Saudis.
While there is a shortage of housing, especially in the low and middle-income segment of the market, there are clear indicators that both the public and private sectors are working to narrow the gap, said Deep Marwaha, group director of Cityscape Saudi Arabia.
"There is a strong drive in the private sector, particularly among developers, to build housing units not only to tackle existing demand for low and middle-income housing but because it is also seen as a good source of profitability," Marwaha added.
Also, apart from the provision of affordable housing, the government's holistic approach to strengthen the economy, tackle unemployment and provide overall better business conditions will have a positive impact on the real estate market, Marwaha said.
Most importantly, he said, the fact that the Shoura Council has approved a long-awaited mortgage law will increase the capabilities of people to buy homes. The mortgage law has to be implemented through efficient regulations and supported by other market segments, of which the relevant government authorities are acutely aware.
Yasser Abu Ateek, CEO of Dar Al-Tamleek, said the passage of the mortgage law should be viewed as a pivotal event in Saudi Arabia's history. He added there is no question that this law will give rise to the birth of an industry that is dedicated to providing options for home ownership throughout the Kingdom.
Perhaps the most positive outcome will be competition among existing financial institutions and potential new entrants to the market, he said, adding this competition will benefit the consumer either in the form of availability of financing options or the reduction in profit rates.
In addition, consumers will have more protection against poor construction quality, as new regulations will dictate standards of construction that are a much needed evolution in the development of housing standards and zoning restrictions. Current government functions such as the notary process will dramatically improve as demand presses current establishments.
Secondary industries such as appraisal/inspection companies, material supply companies and others will directly benefit from legislation that will be beneficial to the consumer. "New competition will bring new standards and more available choices to consumers who are seeking home ownership," Ateek said.
The passage of the new mortgage law, however, will take three to five years to have an impact on the industry. The net effect of the law will be to increase the contribution of the financial sector to overall GDP (gross domestic product) and to raise the average standard of living of consumers in Saudi Arabia. This will be especially meaningful among young Saudis who are trying to establish themselves and provide for their families, Ateek said.
However, Fahad Al-Mutawa, CEO of Ewaan Global Residential Company, said alongside any new residential projects there should be a holistic approach that covers various aspects including sustainable investment, home financing and major infrastructure investments.
Ewaan's vision is to build modern residential communities with integrated facilities that meet the requirements of the middle-income. "We do believe there is need for more real estate developers to shift focus from luxurious and commercial projects to affordable housing," he said.
Al-Mutawa said following the orders of Custodian of the Two Holy Mosques King Abdullah for the establishment of 500,000 low-cost housing units and the allocation of SR250 billion to implement mega projects to solve the country's housing problem, "we think it is high time for the private sector companies to assume their responsibilities in order to cater to the real estate market needs."
Khaled Tash, vice president marketing & sales for Knowledge Economic City (KEC), said the economic cities in Saudi Arabia are envisioned to be catalysts for economic as well as social development in the Kingdom.
"In Knowledge Economic City we consider the residential aspect an integral component of the overall proposition and offering. Attracting investments and economic activities requires not only world-class infrastructure, but supporting products and services as well -- and a good place to live is certainly on the top of that list. Our residential developments are planned as communities, with integrated amenities such as open space, community facilities, parks etc., and services including smart infrastructure, facility management etc., which is a new trend in Saudi Arabia and we are trying to be at the forefront of it," Tash said.
Marwaha said that Cityscape, which is holding a major event in Jeddah from June 11-13, has been active in the Middle East for 10 years and it is the biggest and only event that comprises an exhibition, a conference and a series of award ceremonies.
He said the conference attracts high-level decision makers from Saudi Arabia, the region and the entire world. It is an industry-leading platform for knowledge transfer where delegates, experts and attendees can discuss local issues with an international audience. In effect, it is a learning and networking event for the entire real estate community.
The Cityscape exhibition is an arena for companies to showcase their projects and services to an audience of local and international stakeholders, and is open to developers, leading architects, designers, consultants and all senior professionals involved in the design and construction of real estate, Marwaha said.
The response to Cityscape has been positive from the very start. "Last year, we had close to 10,000 participants and we are expecting to top that number this year," he added.
© Arab News 2011
