The Saudi Arabian Monetary Agency (SAMA) has raised the loan limit for mortgages from 70% to 85%.
In an interview with Blomberg news, Murad Ansari, analyst at EFG-Hermes Holding SAE said that it is a positive development because it will make buying a house more affordable for an individual.
Saudi Arabia’s mortgage loan book was growing at about 40% annually between 2011 and 2014, Ansari told Bloomberg. The late-2014 requirement of a 30% down payment by the buyer on a property’s value made it difficult for potential home buyers.
According to Saudi Economic and Development Company (Sedco), the new legislation will spur housing supply, one of objectives of the Saudi Vision 2030, a strategy aimed at overhauling the economy in an effort to wean itself off oil. The Vision aims to transform the Saudi economy into a powerhouse led by the private sector, which the real estate industry forms an integral part.
Property consultant, Knight Frank says the raft of objectives under Vision 2030 includes, increasing the property sector’s contribution to the country’s GDP from 5% to 10% by 2020 – the equivalent of USD 74.8 billion.
Saudi Arabia is seeking to boost home ownership as well as introducing white land tax, a game-changing reform in the real estate sector. Under the white land tax, owners of empty plots of urban land designated for housing or offices in towns and cities must pay a tax of 2.5% of the value of the land each year. Taxes will apply to urban undeveloped land plots of 10,000 sqm or more.
JLL Country head for KSA, Jamil Ghaznawi, said that “the new law [white law tax] will result in a fundamental change in Saudi Arabia's real estate market and help stimulate further development to address the severe shortage of middle income housing”.
The Saudi Gazette says that the current population growth rate, demand for residential units in the Kingdom ranges between 150,000 to 200,000 units a year, with some four million new units needed over the next 15 years, as the national Saudi population is expected to grow to 30 million by 2020.
In addition to the mortgage law, the government also approved the establishment of a Real Estate General Authority and a Saudi Building Code system.