Saudi Arabia needs to build 115,000 homes a year to hit demand

SAUDI Arabia will need to build 115,000 homes each year for the next six years to fulfil demand from a young population and hit ownership targets set by the oil-rich nation’s government, according to Knight Frank.

The kingdom’s government wants homeownership to reach 70 per cent by 2030 from 63.7 per cent at the end of 2023. The Saudi government’s target along with new household formation are helping drive much of the demand in a country where 45 per cent of citizens are below 20 years old, according to the report.

“There is a huge amount of demand for homes from a young population and huge amount of pressure to deliver,” said Christopher Payne, partner and chief economist for Mena at Knight Frank. “I expect to see large foreign developers come to Saudi as they start to see the opportunity in the market.”

Knight Frank estimates housing demand at 825,000, 35 per cent of which in the capital Riyadh with affordability remaining key to the market.

Pressure has built up on Saudi Arabia’s housing supply in the past few years as many companies relocated staff to Riyadh and opened regional headquarters pushing rents up by 35 per cent in the past three years.

The kingdom’s Sakani programme, which includes social housing, has 883,562 applications from people looking to buy homes with financing help through guarantees on mortgages below 520,000 riyals (S$184,887). The kingdom’s population grew in Saudi at 1.8 per cent annually compared with a global rate of 1.1 per cent between 2010 and 2002, according to the World Bank.

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National Housing Company, known as NHC, has been tasked with building much of the housing supply needed at affordable price point since its inception. The firm has plans for 200,000 homes and the total could reach 300,000 by the end of 2025, Payne estimates.

Mortgages in Saudi Arabia have surged above 600 billion riyals compared with 200 billion riyals in 2019, according to central bank data.

Meanwhile, other developers are adding to the kingdom’s supply of homes which include middle-income and luxury housing such as New Murraba and Roshn. Currently, about 1.04 million new homes are in various stages of development across Saudi Arabia and set for completion by 2030, according to Knight Frank. BLOOMBERG