With a growing population of over 25 million, 70 percent of
which is under the age of 30, the world's largest oil exporter will need to
build one million new homes by 2014, HSBC said in a report last year.
Assaudia Real Estate Development is one such developer that
has revised its plan to focus on mid income property.
"The market conditions have forced us to shift to mid
income housing," said Mohammad Al-Masaabi, the firm's sales supervisor
told Reuters on the sidelines of a property exhibition in Jeddah.
"Now we will not sell for less than SR1.8 million
($480,000) because costs have risen," Al-Masaabi said, adding that land
prices were SR1,500 a square meter when the firm planning the project but have
since risen to SR2,500 a square meter.
The developer originally planned to build 1,000 homes in Jeddah
that will cater to individuals with limited income. They planned to sell villas
ranging from SR800,000 to SR1.2 million but revised their plan as land costs
rose.
Kinan International Real Estate Development company, the
real estate wing of Savola Group, will also cater to mid income customers and
plans to develop a two million square meter development project for up to
11,000 homes in Jeddah over the next six years.
While most demand for housing in the Kingdom comes from low
income individuals, the absence of a mortgage law is preventing them from
buying homes as costs continue to rise.
"There is a great demand for affordable housing but
[developers] can't take the risk of developing... to provide affordable housing
units when they know the targeted segment can not afford it without the
mortgage," said Sari Anbatawi, associate director at Colliers
International.
"There is a section of households in Saudi Arabia where
the income is less than 6,000 riyals a month, I don't think the commercial
developers are focusing on this market," said John Harris, head of Saudi
operations at Jones Lang LaSalle.
"This could be probably 40 percent of households... It
is a very big market but we don't see a lot happening for that sector at the
moment," he added.
Saudi Arabia's long-awaited mortgage law has been in the
planning stages for almost a decade.
