The housing and land prices in Saudi Arabia continue to rise as a growing population and expectations of a long-awaited mortgage law drive demand, Banque Saudi Fransi said on Monday.
The large apartment prices across the biggest Arab economy climbed 4.7 per cent in the second half of the year while smaller apartments gained 8 per cent, the bank said in a real estate survey. Residential land plots rose 8.3 per cent.
With a population of 27 million, 70 per cent under the age of 30, the desert kingdom needs to build one million housing units to meet 80 per cent of expected demand over the next four years.
Saudi Arabia has been, for years, working on a mortgage law to make home ownership more affordable for its young population. But the law, which was expected to come out this year, has been delayed.
‘Anticipation that a long awaited morgage law will be introduced by the first quarter of 2011 has energised demand for land and finished properties as buyers hope the regulatory framework will unleash pent-up demand in the coming years,’ the report said.
In addition to large demand by the 18 million locals, an increase in the number of expatriates in the country have contributed to a rise in residential rent costs, a trend that is expected to continue.
Median Villa rent prices climbed almost 10 percent while large apartment rents rose by 8.1 percent in the second half, the survey said.
‘Rising rents have been a key driver of historically high consumer price inflation… and the pressures are unlikely to let up. Following a dip in home rental rates in H1, survey findings indicate that rents are accelerating quite quickly in the kingdom,’ it said.
Office rents and commercial land plots also increased, although to a lesser degree than the residential units.
Average annual office rents climbed 2.6 per cent in the second half of this year, but are still 20.4 per cent from a year ago, while the cost of commercial land plots rose by 1.6 percent according to the median, the survey showed.