The local director of real estate services firm Jones Lang LaSalle (JLL) said Saudi Arabia’s state spending cuts will pressure people’s ability to buy their own homes and could push housing prices in some segments down by nearly a third, according to a report in Reuters.
A reduction in subsidies available to government employees and new fees will put pressure on consumers’ disposable income, which will negatively impact the ability for middle class Saudis to own their own home. This will in turn put downward pressure on home prices in Saudi Arabia.
“Because of a lack of affordability and purchasing power – and now as we see, reduction of salaries for government employees – we foresee further pressure on affordability,” Jamil Ghaznawi told the Reuters Middle East Investment Summit, adding that that prices of low- to middle-income homes could fall by as much as 30 percent.
“The demand is there, but the question is: Do these people have money to buy?”
Ghaznawi estimated the shortage of low- and middle-income housing at 1 million homes, Reuters reports.
Meanwhile, Saudi Arabia’s central bank said on Tuesday it had asked local banks to reschedule the property loans of citizens whose incomes had been reduced by government austerity measures, a separate report in Reuters notes.
In June, JLL and LaSalle Investment Management’s 2016 Global Real Estate Transparency Index (GRETI) increased Saudi Arabia’s standing to “Semi-Transparent” following efforts by the Chambers of Commerce in Saudi Arabia to form real estate committees.
In February, Saudi Arabia’s central bank said in a statement it planned to launch an “affordable mortgage” program to finance residential real estate purchases by Saudi citizens. Under that scheme, home buyers would be responsible for a down payment of 15 percent of the property’s value, and commercial banks would supply a further 70 percent. An additional 15 percent that would be guaranteed by the Ministry of Finance.
