The Unassuming Economist

“The government is continuing to implement its program to provide affordable housing. In light of the growing population and reported high house prices in the major cities, this is a considerable challenge. Estimates suggest that 160-180,000 new homes will need to be built each year over the next few years to meet growing demand. The government has allocated SR 250 billion from the budget surplus fund for the program, and the Ministry of Housing is continuing to develop options to support buyers which include the provision of interest-free loans (up to SR 500,000), and the payment of interest on behalf of the borrower for mortgage loans taken out from banks. The provision of support to buyers is being allocated according to a points system that favors those with greater need. On the supply side, options being developed include the provision of free public sector land and the proposed “white lands tax” which would increase the land available for housing”, according to the IMF’s annual report on Saudi Arabia.

The report also “(…) emphasized the need for ensuring that the housing needs of the population are met in a cost-effective way while minimizing the disruption to private real estate and mortgage markets. Housing is appropriately an important policy priority, but the program cost is high and to date it has moved slowly. Measures to expand supply should include a strengthened role for the government acting as a facilitator and regulator rather than a developer to help expand housing supply in a cost effective way. In this context, streamlining regulatory and approval processes to achieve efficiency gains could improve the functioning of private real estate markets. With respect to the support for buyers, financing should be targeted to those who are unable to obtain financing from banks or finance companies, and focus on purchases of new dwellings to avoid bidding real estate prices up further.”