While recent performance has not met expectations \u2013 the Real Estate Price Index for Q1 of 2019 declined 0.4% compared to Q4 of 2018 and 4.9% compared to Q1 of 2018[3]<\/a> \u2013 industry experts are confident that Saudi Arabian real estate is a long-term winner.<\/p>\n \u201cDespite the struggles it has gone through in the last two years, the real estate market in Saudi Arabia maintains an overall positive outlook due to the multiple reforms that are being currently planned and executed by the Saudi Arabian government[4]<\/strong><\/a>.\u201d<\/em><\/p>\n Several initiatives have been instigated to ensure the market\u2019s enduring success, helping Saudi Arabia\u2019s young and ambitious population increasingly move into home ownership and prompting experienced observers to forecast imminent growth across the sector[5]<\/a>.<\/p>\n In 2018, the maximum loan-to-value mortgage rate was raised across Saudi Arabia, with applicants now able to raise 90% of a property\u2019s value through a mortgage instead of the previous limit of 85%[6]<\/a>. \u00a0This move was designed to stimulate activity across the residential market. \u00a0Saudi Arabia\u2019s Ministry of Housing wants the mortgage market to reach a total value of US$ 134 billion by 2020, up from US$ 80 billion in 2018[7]<\/a>.<\/p>\n By 2020, the Saudi Arabian government also hopes to reduce the average ratio between house price and per capita income to five times and increase the percentage of home ownership among Saudi citizens to 60%[8]<\/a>. \u00a0Under the National Transformation Plan, it aims to raise real estate\u2019s contribution to GDP from 5% in 2016 to 10% in 2020[9]<\/a>. \u00a0By 2030, its ambition is to see nationwide home ownership levels at 70%[10]<\/a>.<\/p>\n Testing on the Riyadh Metro begins (Image Credit: Riyadh Metro)<\/span><\/p><\/div>\n An injection of multibillion-dollar state support is expected to be at the heart of the residential sector\u2019s revival across Saudi Arabia. \u00a0The introduction of the white land tax in 2017, has also been noted as a clear intent from the government to engage with the issues facing the residential market in the country[11]<\/a>. \u00a0Other moves, such as the approval of regulations around Real Estate Investment Trusts (REITs) in Saudi Arabia, as well as various urban regeneration and infrastructure projects, such as the US$ 22.5 billion Riyadh Metro[12]<\/a> (where, according to global real estate consultants JLL, the value of properties in close proximity to the transit system is expected to increase[13]<\/strong><\/em><\/a>), are also expected to positively contribute to the overall real estate market. \u00a0As stated by property consultancy Knight Frank in its recent report on the Saudi Arabian real estate sector:\u00a0 \u201cWe remain optimistic for the longer term due to the various government initiatives aimed at stimulating the real estate market whilst encouraging the private sector to take a key role in this process, as part of the recently introduced strategic reforms,[14]<\/strong><\/a>\u201d<\/em><\/p>\n In 2018, the Ministry of Housing partnered with Saudi Arabia\u2019s Real Estate Development Fund (REDF) to launch Sakani II, a program designed to deliver 300,000 residential units across the country[15]<\/a>. \u00a0Experts at JLL believe that the first impact of these initiatives will soon start to be felt:<\/p>\n It is certainly true that a significant number of new homes are being added to Saudi Arabia\u2019s residential market. \u00a0In February 2019, there were 5,200 real estate projects under construction across Saudi Arabia[17]<\/a>.\u00a0 In 2018, 29,000 new residential units became available in Riyadh, taking the city\u2019s total supply to more than 1.3 million units. \u00a0By the end of 2020, 60,000 more units are set to be completed. \u00a0It is anticipated that \u201cthe affordable housing sector will continue to drive construction activity and the overall real estate market<\/em>[18]<\/a>\u201d.<\/p>\n In Jeddah, just under 5,000 residential units were completed in 2018, taking the city\u2019s total supply to 817,000 units. \u00a0Another 23,000 units are set to be completed by the end of 2020[19]<\/a>.<\/p>\n Among the units entering the Jeddah market in 2018 were 242 one, two, three and four-bedroom contemporary family apartments at the new J|ONE<\/a> complex in the Al Salamah district \u2013 the first residential project completed by Abdul Latif Jameel Land<\/a>.<\/p>\n![\"\"](\"https:\/\/www.alj.com\/app\/uploads\/2018\/08\/Vision-2030-300x204.png\")
Vision 2030 states that the:\u00a0 \u201cReal estate industry plays a substantial role in promoting sustainable development in Saudi Arabia; it is a strategic production factor for all vital sectors. \u00a0It is also a vital incentive for income-based, job-creating investment, in addition to being a basis for launching investment projects in miscellaneous economic and social fields[2]<\/strong><\/a>.\u201d<\/em><\/p>\n![\"\"](\"https:\/\/www.alj.com\/app\/uploads\/2019\/06\/1-Growth-Mortgage-Market.png\")
<\/p>\n![\"\"](\"https:\/\/www.alj.com\/app\/uploads\/2019\/06\/Riyadh-Metro-300x225.jpg\")
![\"\"](\"https:\/\/www.alj.com\/app\/uploads\/2019\/06\/JLL-150x72.png\")
\u201c2019 is expected to witness ongoing activity on the back of strong reform momentum and increased government spending as outlined in the 2019 budget announcement… \u00a0We expect this to reflect positively on the real estate sector as commercial activity picks up and foreign investment increases. \u00a0As the biggest economy in the Middle East, we are also likely to see private demand play a large role in the real estate and construction sectors[16]<\/strong><\/a>.\u201d<\/em><\/p>\n![\"\"](\"https:\/\/www.alj.com\/app\/uploads\/2019\/06\/2-Residential-Riyadh.png\")
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