Riyadh, 11th November 2024: Over 115,000 new homes are needed each year up to 2030 to satisfy demand from Saudi nationals, according to global property consultancy, Knight Frank’s new whitepaper: Transforming Saudi’s Residential Housing Market: Opportunities Abound.
Approximately one-third of this incremental demand is being driven by the government’s 70% homeownership rate target, given the rate of homeownership rate stood at 63.7% at the end of 2023.
The larger driver of projected housing demand, approximately two-thirds, is due to household formation, as young Saudis, whether single or married, opt to move into their own home, says Knight Frank.
Dr. Christopher Payne, Partner – Chief Economist, MENA, explained: “Housing demand is a function of Saudi Arabia’s young population. Around 45% of Saudi nationals are under 20 years old and 63% are under 30 years old. Over the coming years, these young Saudis will want, quite naturally, to live in and own their own homes.”
Knight Frank’s conservative estimate of housing demand between 2024-2030 stands at 825,000 units. As of the end of 2023, the Ministry of Municipal and Rural Affairs (MOMAH) reported that there were 883,562 applicants to their Sakani program, which is focused on the giving Saudis access to home ownership, and the financial wherewithal, to afford their own homes.
National Housing Program key to success
The Kingdom’s Housing Program was created in 2018 to overhaul the governance, delivery, and financial provision of the residential housing market. One of the Program’s key initiatives is the Sakani program. Since its establishment, over 800,000 contracts have been signed, of which 415,000 were for ready-made homes, 201,000 were for self-construction projects, 90,000 were for off-plan products and 94,000 were for MOMAH land products.
The Housing Program has also enabled the sale and marketing of off-plan properties, i.e., homes sold before they are completed. The off-plan sales program has opened up a whole new way to finance residential development, while providing consumers with all the legal protections they need.
Mohamad Itani, Partner, Residential Sales and Marketing Projects, KSA, said: “By establishing the Housing Program, the Ministry of Municipalities and Housing, along with other government agencies, has transformed the residential housing sector. The prospects for Saudi’s housing market are extremely exciting.”
One key marker for the success of the Housing Program and its numerous initiatives has been the incredible growth of mortgage finance, which has expanded from SAR 121.9bn at the end of 2016 to SAR 662.4bn at the end of Q2 2024, an over five-fold increase in under 8 years.
A Building Program fit for the Kingdom
On the demand side, MOMAH has utilised on-line service platforms to streamline and speed up housing applications by Saudi nationals. At the same time, on the supply-side, the Etmam program has provided the industry with a one-stop online service centre for obtaining the necessary approvals and permits required for development.
Also addressing the supply-side, the National Housing Company, or NHC, was established in 2016 by MOMAH to manage and oversee the delivery of affordable, high-quality housing to Saudi nationals. The NHC has already announced developments within their new community masterplans that incorporate approximately 200,000 housing units. By end of 2025, this total is expected to reach 300,000 units.
Knight Frank is currently tracking 1.04 million new homes that are either under construction, or planned, and due to be delivered by 2030.
Amar Hussain, Associate Partner, Research, KSA, said: “For developers, both local and international, the size of the housing market in Saudi Arabia presents a tantalising opportunity to help deliver the government’s vision in what is arguably the most exciting new global real estate market.”
So far, the Housing Program is proving a huge success. In 2022, the proportion of non-oil GDP spent on housing was 8.5%, significantly up on the average spend between 2018 and 2021, which equated to 5.5% of non-oil GDP.
MOMAH has set itself an ambitious goal to meet the aspirations of the Kingdom’s young population. It is based on the clear understanding that a virtuous cycle of economic growth and investment requires ensuring a sufficient supply of housing provision across all income segments of Saudi families.
