SAMA expects real estate credit growth to slow down
The relatively fast pace of growth in credit to the Saudi real estate sector is now forecast to slow down as a result of the maximum ceiling of a mortgage being fixed at 70 per cent.
The Saudi Arabian Monetary Agency (SAMA) says the application of the 70-per cent rule for mortgages will help quash fears of excessive debts in the real estate sector.
In its 2015 financial stability report, SAMA notes that it took a number of pre-emptive measures in order to slash shadow banking by initiating major reforms to non-banking institutions.
SAMA put a maximum ceiling on mortgages as a precautionary tool to avert financial crises and maintain and solidify fiscal stability, Aliqtisadi reports.
In the past six months of the current year, the value of real estate deals and sales in the kingdom sank by 20.4 per cent to SAR193.6 billion compared with SAR243.4bn in the same period last year.
According to industry sources, the downward trend has been affecting all indicators of the property sector, including the number of deals, the number of properties and the size of sold properties.
Experts blame a shortage in liquidity, the plunge in oil prices and the new rules requiring those seeking mortgages to pay a down payment of 30 per cent of the property’s price for the sluggish performance of the real estate sector.
(SAR1 = AED0.97, at the time of publishing)