At the close of 2023, real estate transactions in the Kingdom witnessed a 16% drop. For homeownership in Saudi Arabia, this was not a piece of welcome news. It spelt doom at the dawn of 2024 when Saudis continued to grapple with high interest rates, price increases, and a significant decrease in mortgage lending. For the real estate sector, the year did not end well! The Kingdom is only 5 years shy of the much-anticipated 2030 when we expect 70% of the population to own homes. The Kingdom prides itself in the growth of the non-oil sector contributes 60% of the GDP and has a positive population outlook of a 3.4% annual increase Obviously, these trends mean something for the RE sector, especially the homeownership trends.
Here are some of the homeownership trends you need to know…
Rising Cost of Housing
Q1 2024 was characterized by price upswings in residential land prices at 0.4%. In the same period, apartment prices rose by 0.7%. These changes in prices had a considerable impact on the homeownership. For instance, housing costs increased by 9% in May 2024 despite inflation remaining below 2%. During the first quarter, the Real Estate Price Index in the Kingdom increased by 0.6%compared to the same period in 2023. While there is still optimism regarding the realization of 70% home ownership as highlighted in Vision 2030, the recent price increases make the path to this objective cloudy.
Increased Homeownership Rates
The homeownership rate in Saudi Arabia has risen notably, currently hovering around 63% with aspirations to reach 70% by 2030. This increase from 62% in 2020 and even higher from 47% in 2016, demonstrating rapid progress driven by government initiative.
Government Initiatives and Programs
The Saudi government has launched several programs under Vision 2030 to boost homeownership. These include the Sakani program, which provides housing and financing solutions, and the establishment of the National Housing Company (NHC), which has been instrumental in developing new housing units. Over 165,000 housing units have been built, with plans to add another 365,000 in the coming years.
Economic and Demographic Drivers
Economic growth and rising household incomes have contributed to the increased ability of Saudis to purchase homes. Additionally, the growing population, particularly the influx of young Saudis entering the workforce, has fueled demand for housing. Urbanization trends are also significant, with a substantial portion of the population moving to urban areas, leading to increased demand for housing in cities like Riyadh, Jeddah, and Dammam.
Real Estate Market Dynamics
The real estate market has seen rising property prices, particularly in major cities. In Riyadh, for example, apartment prices rose by 10% in the first half of the year due to high demand and limited supply. The availability of mortgage financing has also played a crucial role in boosting homeownership. Saudi banks and financial institutions have been proactive in providing residential mortgages, significantly contributing to the housing sector’s growth.
Future Outlook
The government aims to address housing shortages by continuing to develop large-scale residential projects. Significant projects like the Neom City, Red Sea Project, and Diriyah Gate are expected to add thousands of residential units to the market, further supporting the goal of increased homeownership. The focus remains to be on making housing more affordable and accessible, particularly for vulnerable populations, as part of the broader socio-economic transformation envisioned in Vision 2030.
In sum…
Saudi Arabia is making substantial strides in increasing homeownership, supported by robust government initiatives, economic growth, and strategic development projects. In as much as the current contributes to decreasing transaction rates, there is hope in the initiatives to deliver on the objective of homeownership.