Residential mortgages in Saudi Arabia have hit a five-year high, as per the Global property consultant, Knight Frank.
Across the kingdom, 25,700 mortgage contracts were issued in April, and 38,285 mortgages were allowed for purchasing villas and townhouses in the first quarter of 2021, with SAR48 billion ($12.8bn) worth of residential mortgages for homes and land issued – both five-year highs.
One measure Saudi authorities took to mitigate the effect of COVID-19 was to raise the Kingdom’s value-added tax (VAT) to 15 percent, however, a choice was taken to exempt real estate transactions from the change. This has brought about a lift to the residential real estate market, Knight Frank clarified.
Residential mortgage loans increased 38% in the 12 months ending February, with residential deals increasing over the whole country.
Riyadh and Jeddah both witnessed increases, 25%, and 34% respectively, over the last 12 months, but the Kingdom’s three main residential areas “have experienced diverging performance in values for apartments and villas,” Durrani said.
While apartment values in Riyadh, Jeddah, and the Dammam Metropolitan Area all increased, villa prices fell across the board.
“The vast apparatus that is Vision 2030 is percolating through to the kingdom’s residential market, with rising residential mortgage rates, helping the government to realize its ambitions of higher homeownership rates,” said Faisal Durrani, head of Middle East research at Knight Frank.
“Indeed at 60 percent at present, the government has already surpassed its 2020 target by eight percent and is well on course to achieving 70 percent homeownership by 2030.”
Knight Frank noticed that various key strategic initiatives support residential sales activity’s resilience, which has seen deals volumes return to pre-Covid levels.
“Initiatives such as Sakani, which was first launched in 2017 to boost homeownership through a landmark housing allocation program, plus the Wafi programme that allows off-plan sales, are transforming Saudi Arabia’s residential landscape. This coupled with the kingdom’s tremendous home building programme, which aims to add over 500,000 units to Riyadh’s housing stock by 2030 alone – that’s just 100,000 units less than Dubai’s total current housing stock – means Saudi nationals are able to access the housing ladder in record numbers.
“Indeed, at 115,000 transactions, sales volumes between January and May are on par with the same period in 2019 and are in fact 49 percent higher than January to May 2018. Homebuyers and lenders are clearly feeling more confident about life as the post-Covid recovery starts to bed in,” Durrani said.
Knight Frank informed that 1.1 million families have benefitted from the Sakani program since its launch five years ago.