The Kingdom has five million residential units at present. But he said the overall number of units needed by 2021 is estimated to reach two million as at least 25 percent of the population is expected to be of 30 years of age in the next decade.
He was speaking at a session of the Big 5 International Building and Construction Show being held here.
Harris said the population was growing at about three percent per year but housing was in short supply, particularly in Jeddah.
Recent floods have also contributed to the demand with many previous homeowners moving to rental properties, he said.
Harris said housing inflation had been at 10 percent over the last few years despite the current overall inflation rate of 5.4 percent.
Speaking about a solution to the housing problem, Harris said: “This is not an issue that will be solved by private developers building and merely selling, but is an issue that requires large-scale government support such as from the Real Estate Development Fund or other government agencies.”
Due to the growing demand, he expects new home prices to increase by at least five percent in the next 10 years.
Many large-scale infrastructure projects are under way across the Kingdom, Harris said adding that expatriates, and not Saudis, accounted for a majority of new home sales.
“We have found that the sales of new homes within the Saudi housing market is being driven by long-term expatriates with 35 percent making purchases annually, in turn creating diversity in the market,” Harris said.
Due to a lack of residential units, absence of mortgage lending and rising land and construction prices, demand pressure has also been put on the rental sector.
According to Jones Lang Lasalle, villa prices in Jeddah have increased in 2008 from SR2,625 to SR3,750 per square meter to SR4,125 per square meter this year.
Apartment prices have also followed with rates on the Jeddah Corniche reaching SR11,750 per square meter, compared with Dubai at SR18,750 per square meter.
Giving a market outlook on rents for the future, Harris said: “I expect rents to still increase into next year. The strongest inflationary pressure is on the residential sector due to the government’s lack of developing housing enough to push rent prices down.”
Nonetheless, there are many new opportunities now for developers of both villas and rental properties in the form of creating larger companies that can form joint ventures with international construction firms, he added.
“We are now seeing off-plan sales coming on line which are making it easier to build. It used to be challenging for developers because they were not allowed to get a bank loan until the project was half finished, which means that the landlord had to supply the full capital and thus limiting the number of developments that could be started,” Harris said.
Other opportunities for the real estate market are that private companies are beginning to develop their own mortgage ownership schemes.
He also predicted new opportunities in government development of community-based housing complexes, more infrastructure in smart and green buildings, and technical and landscaping capabilities.
“There is a massive need for villa estates, apartment complexes in the residential sector that will provide staggering opportunities for new construction projects,” Harris said.
He pointed out that although pre-fabricated materials could help cut construction costs most Saudi companies were still reluctant to move away from concrete and steel, driving prices higher.
When asked if the mortgage law could help offset lack in demand and balance prices, Harris said the law’s approval “will have a positive impact on lowering costs of lending money for homes.”
But Harris said he had no indication when the law would go into effect.
