Saudi Arabia is set to allow foreign lenders to enter into its property market as the country attempts to prepare for significant population growth while dealing with the reality of low housing supply. A draft law has been proposed to make foreign lending possible, but experts say many other changes must be made, including more transparency in the housing market, more availability of affordable homes and a streamlined housing development and approvals process. Demographers believe populations could increase as much as 58% in the country’s largest cities by 2025 and access to housing will become critical. For more on this continue reading the following article from Property Wire.
The residential property market in Saudi Arabia is set to be transformed with the country’s central bank allowing foreign companies to provide mortgages, it is claimed.
There is huge demand for homes in the country but until now getting funding has been difficult. Now a draft law approved last year is set to open up the market.
According to rating agency Standard & Poor’s the new legislation will transform home financing and overall the lending market is set to grow substantially.
Some 200,000 new homes a year are needed, according to real estate property service company Jones Lang LaSalle so the demand for loans is likely to be high. It is predicted that the population of large cities such as Jeddah, Riyadh and Dammam could grow by between 52 and 58% by 2025, causing even more demand for housing.
A company will be created to register leases and a refinancing company with a capital of SR5 billion will be set up.
Also developers want Saudi Arabia to establish a bank dedicated to funding new projects that would help address the country’s housing shortage. They are also calling for the government to appoint an agency to regulate land prices and for transparency in the system to prevent price manipulation.
They are also calling for the government to subsidise land and streamline development approval processes, banks to be more lenient in lending to developers and investors.
There also needs to be more affordable houses built and young people have to accept that they cannot necessarily afford a large home and be more realistic about their expectations, according to Riyadh Al-Thuqafi, chief executive officer of Ewaan Global Residential.
‘The main issues facing the need for affordable housing in Saudi Arabia are population growth and income levels, but we also have internal issues such as escalating land prices, the preference of Saudis for large, expensive houses and the unwillingness of banks to offer project financing,’ he explained.
Speaking at a conference in Saudi Arabia, he added in order to solve these issues, the government sector must work with private sector developers.
He also believes that a governmental body backed by the Capital Market Authority should be established to finance real estate projects in place of banks, which have been reluctant to support development plans.
Major housing developments have been announced. Saudi Arabia’s Riyadh Development Authority (RDA) has approved a SAR278 billion plan for more than 3,000 projects in the capital city.
As well as housing projects in the city centre there will be three main railway lines and four consortiums of 33 companies are bidding to build a metro network in Riyadh.
This article was republished with permission from Property Wire.