Government incentives for the private sector and mega state-owned developments will gradually strengthen domestic demand for real estate in Saudi Arabia, S&P Ratings Agency said in a recent report.
“Government initiatives, such as those incentivizing developers to build affordable homes, encouraging banks to introduce more home financing options, will lead to increase in home ownership rates among Saudi citizens,” it noted.
Furthermore, increasing population and potential economy recovery over the coming years will drive ‘sustainable’ growth in the medium term.
“We expect a rebound in economic growth to 2.3% on average over 2020-2022 to support the real estate market,” the ratings agency said.
However, residential rents and prices are likely to remain under pressure as supply is slated to increase albeit slowly.
According to JLL's third-quarter 2019 report, residential sale prices declined 5-6% year-on-year (YoY), while rentals fell 1% YoY.
The Kingdom has a population of about 34 million, of which approximately 60-65% are citizens. Home ownership rate among Saudi nationals was 50% in 2016, according to the Saudi Housing Vision Realization Program. The government aims to increase home ownership rates to 60% by 2020 and 70% by 2030, from 50% in 2016.
In addition, the Kingdom’s recently approved permanent residency program to some foreigners will also boost property prices, S&P stated.
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