Saudi Arabia recorded 48 billion Saudi riyals ($12.89bn) worth of residential mortgage contracts in the first quarter of 2021 to hit a five-year high as business activity and demand picked up in the Arab world’s biggest economy, according to a report by global property consultancy Knight Frank.
The increase, which includes both home and land contracts, comes as residential sales activity in the kingdom recovers to pre-coronavirus levels, the report said.
"The vast apparatus that is Vision 2030 is percolating through to the kingdom's residential market, with rising residential mortgage rates helping the government to realise its ambitions of higher home ownership rates,” said Faisal Durrani, head of Middle East research at Knight Frank.
“Indeed, at 60 per cent at present, the government has already surpassed its 2020 target by 8 per cent and is well on course to achieving 70 per cent home ownership by 2030."
A total of 38,285 mortgages were issued for the purchase of villas and town houses in the first quarter, according to the report.
Mortgage contracts in April also rose to their highest level in five years as residents continued to buy homes.
Saudi Arabia has set an ambitious target of raising home ownership rates in the kingdom to 70 per cent by 2030 under the Sakani programme – a joint initiative between the Ministry of Housing and the Real Estate Development Fund.
The fund distributes land plots and arranges home loans for Saudi citizens seeking to build homes.
About 1.1 million families have benefitted from the Sakani programme, according to Knight Frank.
"Initiatives such as Sakani, which was first launched in 2017 to boost home ownership through a landmark housing allocation programme, plus the Wafi programme that allows off-plan sales, are transforming Saudi Arabia's residential landscape,” said Mr Durrani.
The kingdom also exempted property deals from VAT in October last year and introduced a 5 per cent property transaction tax.
Saudi Arabia plans to add more than 500,000 units to Riyadh’s housing stock by 2030, which is 100,000 units less than Dubai’s current housing stock, according to the report.
In December, community developer Roshn, which is backed by the kingdom’s Public Investment Fund, announced plans to build 30,000 homes at a 20-square-kilometre residential project in Riyadh.
Saudi Crown Prince Mohammed bin Salman also allocated 20 million square metres of residential land for the construction of 53,000 homes in Riyadh in May.
Earlier this week, the PIF-owned Saudi Real Estate Refinance Company signed a partnership agreement with the Arab National Bank to provide long-term liquidity in the home-financing market and boost home ownership by Saudi citizens.
“Home buyers and lenders are clearly feeling more confident about life as the post-Covid recovery starts to [set] in," said Mr Durrani.