All-time high mortgage volumes boosting Saudi economy: KPMG

All-time high mortgage volumes boosting Saudi economy: KPMG
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Updated 28 September 2021

All-time high mortgage volumes boosting Saudi economy: KPMG

All-time high mortgage volumes boosting Saudi economy: KPMG

RIYADH: A booming mortgage market has helped fuel economic growth in Saudi Arabia this year, according to financial analysts KPMG.

The firm’s ‘Future Finance’ report claimed businesses operating in the real estate sector are key figures among the Kingdom’s non-bank financial institutions (NBFIs), which are helping the economy recover after the pandemic. 

KPMG estimates the value of Saudi Arabia’s NBFIs — which include automotive, commercial equipment and other consumer financing firms —  at about SR54 billion ($14.5 billion).

This sector plays a pivotal role in lending to certain segments of borrowers within the Kingdom.

Khalil Ibrahim Al Sedais, office managing partner at KPMG in Saudi Arabia said growth momentum which began in the second half of 2020 carried through into the first six months of this year.

“It is especially noticeable in the mortgage industry, where volumes were all time high due to domestic demand for housing, low interest rate environment and government guarantee for the first house of a citizen,” he said. 

Al Sedais added that NBFIs are expected to continue growing thanks to developments in the Saudi financial services sector, including in anti-money laundering compliance, fintech advancement, cybersecurity, business continuity planning and digitalization.

Currently, more than 35 NBFIs are operating in Saudi Arabia. As at the end of the fiscal year 2020, the total paid up capital of these entities was SR14.2 billion ($3.8 billion).

Real estate companies stand at SR3.9 billion ($1 billion), with non-real estate companies at SR8.8 billion ($2.3 billion).

Saudi Real Estate Refinance Company (SRC), as the refinancing entity of the industry, comes in at SR1.5 billion ($403 million).

Industry-wide total assets were SR 53 billion ($14.2 billion) by end of fiscal year 2020, and there was an outstanding loan book, on and off-balance sheet, of approximately SR54 billion ($14.5 billion).

This included the real estate companies’ loan book of SR 23.5 billion.

There was on-balance sheet loan portfolio growth of 16 percent compared to 2019, consisting of SR3.97 billion, according to KPMG. 

Despite SAMA’s new regulations allowing deposit-taking by finance companies, NBFIs are highly dependent on borrowing and securitization as the main source for financing their lending activities. 

At the end of 2020, equity and liabilities totaled SR53 billion of which, liabilities accounted for 63 percent, while capital and reserves represented 27 percent and 10 percent, respectively.


Spain plans to ask to exit EU common electricity price policy

Spain plans to ask to exit EU common electricity price policy
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Updated 7 sec ago

Spain plans to ask to exit EU common electricity price policy

Spain plans to ask to exit EU common electricity price policy
  • Facing spiralling electricity prices, partly triggered by more expensive natural gas

The Spanish government plans to ask the European Union for permission to exit the common electricity price policy and establish its own pricing mechanism, El Pais newspaper reported on Tuesday, citing an internal government document.


The document has been shared in Spain, hours before EU energy ministers are due to meet in Luxembourg to discuss electricity prices, the newspaper said.


Facing spiralling electricity prices, partly triggered by more expensive natural gas, the Spanish government has passed tax breaks, a claw-back of electricity utilities' profits and pushed for EU-wide measures such as joint natural gas purchases.

Earlier, Spain's Secretary of State for Energy said the EU electricity market must be reformed and EU countries should have the option to buy gas collectively, among other measures to tackle record-high power prices.

EU commissioner Thierry Breton said on a French radio station on Tuesday that he was not sure joint purchases as suggested by Spain would be effective, and was echoed by Luxembourg's energy minister Claude Turmes who said the proposal for EU countries to jointly buy gas would not offer a solution to the recent spike in energy prices.

Separately, French Finance Minister Bruno Le Maire told a Paris conference on Tuesday that the European energy market needs reforming, as European countries battle with rising energy prices.


Divisions have deepened among European Union countries ahead of an emergency meeting of ministers on Tuesday on their response to a spike in energy prices, with some countries seeking a regulatory overhaul and others firmly opposed.


Countries are struggling to agree, however, on a longer term plan to cushion against fossil-fuel price swings, which Spain, France, the Czech Republic and Greece say warrant a bigger shake-up of the way EU energy markets work.

 

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Britain's Heathrow Airport said it was still reporting losses and does not expect air traffic to recover completely until at least 2026 even as the travel industry gathered steam in the third quarter on easing restrictions.


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The airport, which is owned by Spain's Ferrovial, the Qatar Investment Authority and China Investment Corp among others, said its shareholders have achieved negative returns in real-term over the last 15 years.


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