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Saudi forecasts real estate growth

Saudi Arabia: Thursday, May 07 - 2009 @ 12:13

The rate of annual growth of the real estate sector in Saudi Arabia was nearly 5.1%, achieving a 40% growth in fixed capital in the real estate market from 2000 to 2005.

The sector was able to achieve growth in GDP of SR41.7bn in 2000 to more than SR54.5bn in 2006, supported by a series of drivers that have made it the biggest and most attractive market in the region.

Economic reports indicate an activity of some SR200bn annually in the real estate market, which has an estimated total volume of nearly SR1.4 trillion, while statistics indicate the need for over 200,000 extra housing units annually until 2020.

Residential units account for 75% of total real estate activity in Saudi Arabia, which needs over SR75bn in investments annually to meet the demand for housing.

Predicted population growth

Currently an estimated 70% of Saudis do not own homes. Riyadh alone needs to provide 1.5 million housing units until 2018 at a cost of up to SR1125bn.

It is expected that the population of the kingdom will grow at an average annual rate of 2.5% to reach 25.66 million people by the end of 2009. Additionally, the mean number of family members is expected to decrease from 5.5 to 5.2 people between 2005 and 2009, which will result in an increase in the volume of demand of real estate.

The eighth national development plan expects the future demand for real estate to come to a halt at the million units mark, between 2005 and 2009, an average increase of to 200,000 units a year. This requires SR500bn of investment in construction for the properties.

New legislation

Saudis are also looking forward to the activation of the new real estate regulations and its impact on the real estate sector, especially in providing the necessary funding mechanisms to enable buyers to own a home.

Real estate experts have stressed that the system of real estate financing will play an important role in the coming years in securing housing, especially as the percentage of those who own houses in the kingdom does not exceed 40%. According to developers, the five new real estate regulations would stimulate and revive the local market.

Developers have stressed that the draft regulations issued by the Shura Council some months ago, when issued, approved and activated, will support the market, attract investment, and provide reassurance to foreign investors.

The kingdom’s housing strategy aims to increase the rate of ownership of Saudi families from about 55% in 2005 to about 80% by 2020.

This comes at a time of a continuing decline in the amount of housing provided by certain government agencies, in addition to the lack of available funding to keep pace with the demand for loans from the real estate development fund.

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Thursday, May 7- 2009 @ 12:13 UAE local time (GMT+4) Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Mediaquest FZ LLC.

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