Saudi Arabia unveiled a 120 billion riyals new housing programme as the kingdom seeks to boost Saudi ownership of homes from 47 per cent to 70 per cent by 2030.
The kingdom’s programme includes an 18bn riyal loan-guarantee programme to boost access to funding, and 12.5bn riyals to support home down payments, all to be spent through 2030, Housing minister Majed Al Hogail told Bloomberg. Authorities want to expand the mortgage market by more than 70 per cent to reach 502bn riyals by 2020, largely through increased private-sector participation, he added. The government provides 65 per cent of home loans.
The housing programme is a welcome move that will help tackle the issue of affordable housing, analysts said.
“On the demand side, the issue has always been affordability,” said James Reeve, chief economist at Samba Financial Group, one of the biggest lenders in the kingdom. “That is, most Saudis want housing but cannot afford what is on offer. Since the passage of the mortgage law, bank mortgage lending has slowly picked up, and these latest measures should help to bolster lending still further.”
Sixteen government institutions are taking part in the programme that aims to provide a wide choice of housing units at prices that suit various segments of Saudi families, state-run Saudi Press Agency said.
Saudi Arabia, the world’s biggest oil exporter, is implementing various initiatives as part of reforms aimed at overhauling the economy under Vision 2030, an overarching roadmap.
The government has unveiled a number of initiatives to address the housing issue.
The Public Investment Fund (PIF), Saudi Arabia’s sovereign wealth fund, set up last year a real estate refinancing company that will help to pump liquidity into the real estate financing market, which is forecast to rise to 500bn riyals by 2026 from 280bn riyals in 2017. The company, which was launched in partnership with the ministry of housing and has received a licence from the Saudi central bank, the Saudi Arabian Monetary Authority (Sama), is expected to refinance up to 75bn riyals worth of mortgage debt over the next five years, reaching 170bn riyals by 2026.
Last year Sama revealed mortgage measures aimed at galvanising the housing market. Mortgage holders will be exempt from paying administrative fees when they switch between floating loan rate to fixed loan rate and they can also move from one mortgage lender to another at no extra cost, the kingdom's financial regulator said.
Sama also said last year it would allow mortgage finance companies to provide more funding to home purchases by raising the maximum loan-to-value ratio for home financing from 70 per cent to 85 per cent for citizens' first home ownership only. The bank licensed a national home finance company, Bidaya and introduced an affordable mortgage programme in conjunction with the ministry of finance. The government has also implemented a 2.5 per cent "white land tax" to prod land owners to develop idle plots for residential use rather than hold on to their undeveloped properties.