Housing will keep Saudi Arabia’s inflation rising during the first quarter but a stabilisation in food prices will keep it below the 1.5 percent recorded in the previous quarter, the kingdom’s central bank said on Sunday.
With the exception of sugar, the Saudi Arabian Monetary Agency (Sama) expects a stabilisation in food prices, which account for 26 percent in the the weighting of the cost of living index used to track Saudi inflation. The renovation, home rent, fuel and water group weighs 18 percent in living index.
“Projections indicate that inflationary pressures in the kingdom will continue during the first quarter of 2010 albeit at a slower rate than in the fourth quarter of 2009,” Sama said in a report.
“Most of the inflationary pressures in the kingdom come from the renovation, home rent and fuel group … As for the food and drinks group, a price stabilisation is expected locally during the first quarter of 2010 to the exception of sugar.”
Inflation in Saudi Arabia fell to 5.1 percent in 2009 from 9.9 percent in 2008, which was the highest in more than 20 years. Sama said inflation over the the 2004-2008 averaged an annual 3.4 percent.
But it has been accelerating on a quarterly basis in 2009. It rose to 1.5 percent in the fourth quarter from 1.2 percent in the third quarter and 0.5 percent in the second quarters, Sama said.
The home rents index rose 14.2 percent in 2009 up from an average 5.3 percent per year over the previous five years while the food and drinks index rose 2 percent in 2009 down from an annual average of 6.4 percent over the 2004-2008 period, Sama said.
Saudis hope a new mortgage law would soon be enacted to open up home ownership to more of the 25 million population in the most-populous Gulf country, less than a third of whom currently owns property.
The low home-ownership ratio is seen by analysts as reflecting weaknesses in Saudi Arabia’s wealth distribution policies, which the government has been seeking to address.
US consultancy Clayton Holdings, which advised Real Estate Financing Co (Refco), estimated in 2009 that the world’s top oil exporter had a housing deficit of 2 million residential units, a figure which was rising by 200,000 a year.