SOLVING SAUDI’S HOUSING QUAGMIRE
Over the course of the past 12 months, Saudi Arabia's government has continued down its path of drastically overhauling the local housing market to meet surging demand.
Spearheaded by the Ministry of Housing, an institution that is itself merely eight years old, the solutions to the country's housing shortage are ones that directly impact a number of sectors, from construction to financing. Moreover, as the implemented policies revolve around providing easier, more affordable access to homes for citizens, and in particular the booming young population and first-time buyers, it is also one of the most important socioeconomic issues on the Kingdom's national agenda, making it a key component of the Vision 2030 reforms.
In fact, according to the Minister of Housing, Majed bin Abdullah bin Hamad Al-Hogail, strains on the local residential sector “take the lead” in the “large synchronized government efforts toward trying to solve national challenges.” This is because, despite widespread government efforts and growing private sector participation, the gap between supply and demand continues to widen exponentially.
A closer look at the demographics reveals why. As a nation with one of the youngest populations in the world, over half of Saudi's citizens are under the age of 25. However, there is a shortfall of 100,000-200,000 housing units delivered to the market each year. While currently 47% of Saudi's own their homes, it is clear that unless a concrete transformation plan is introduced—and successfully implemented—this figure will likely dwindle as the local population surges to 37 million by 2025.
In line with Vision 2030, the government's response has been broad-based and purposeful in tackling the supply deficit head on. And as with most other sector impacted by the Vision's reforms, the focus will be on privatization. Specifically, the ministry hopes that the PPP model will contribute over 1.5 million homes up until 2022, and has allocated over SAR200 billion (USD53 billion) in private-sector incentives to further stimulate developers, such as offering financial support for those using energy-efficient installations.
Another key policy is the revamping of the Real Estate Development Fund (REDF), which assists and subsidizes over 500,000 citizens looking to get their foot on the property ladder. According to the Minister, the REDF will also, “use its USD50 billion assets to invest back into the real estate development sector, which is a major cash injection into the supply side of the sector.” Speaking on the REDF's new role, the fund's Director General, Ayham Al Yousef added, “By 2018, we will have moved away from being a lender utilizing huge resources to becoming a market maker, one that can support banks strategically or tactically, introduce products, pull out other products, and to be able to move the market strategically to the benefit of citizens, who are our beneficiaries.”
An increasingly popular means of accessing fresh financing for the housing sector has been through the issuance of Real Estate Investment Trusts, or REITs. At the beginning of 2016, the Capital Market Authority approved the listing rules for REITs, paving the way for easier, direct access for smaller investors in Saudi's real estate.
Despite the obstacles that lay ahead, not least stubbornly low oil prices, which often have a tit-for-tat impact on construction, Saudi Arabia's leadership has shown it has the determination and mechanisms to solve one of the greatest challenges of its young and vibrant generation.
SOLVING SAUDI’S HOUSING QUAGMIRE
TABLE OF CONTENTS
Column
YB Pehin Dato Lim Jock Seng, Minister at the Prime Minister’s Office & Second Minister of Foreign Affairs and Trade, Brunei
TBY talks to YB Pehin Dato Lim Jock Seng, Minister at the Prime Minister's Office & Second Minister of Foreign Affairs and Trade, Brunei, on the sector.
read articleReview
A Crude Awakening
The Kingdom has made renewables a critical aspect of its ambitious Vision 2030 effort to diversify its economy and wean itself from a strictly carbon-based diet, not to mention empower local businesses and individuals to take up the mantle and lead the energy sector into the next generation.
read articleInterview
Abdulaziz AbdulKarim, Vice President of Procurement & Supply Chain Management (PSCM) , Saudi Aramco,
TBY talks to Abdulaziz AbdulKarim, Vice President of Procurement & Supply Chain Management (PSCM) at Saudi Aramco, on the IKTVA program, supporting local content, and looking back over a successful year.
read articleInterview
Ayman Abdullah Alfallaj, CEO, Thiqah
TBY talks to Ayman Abdullah Alfallaj, CEO of Thiqah, on how the private sector can keep pace with the speed of public reforms, delivering a strong and lasting value proposition, and integrating the fruits of privatization into the public sector.
read articleFocus: Technology Investments
Investment Calling
A technological revolution is underway in the Kingdom. Already one of the most tech-savvy nations in the Middle East, the Saudi market has long sought a thriving domestic technology and innovation scene. And with Vision 2030, it is on course to deliver just that.
read articleReview
A Hejaz Unhindered
An ambitious series of road and rail projects from the Jordanian border down to the Indian Ocean are slated to open in part before the end of 2017. They bring the Kingdom that much nearer to its goal of greater non-carbon-based economic integration with the world.
read articleInterview
Sulaiman bin Abdullah Al-Hamdan, Former Minister of Transport and Minister, Civil Service
TBY talks to Sulaiman bin Abdullah Al-Hamdan, Former Minister of Transport and current Minister of Civil Service, on an attractive legislative framework for investment, railway linkages, and port developments.
read articleInterview
Rumaih M. Al-Rumaih, President, Public Transport Authority (PTA
TBY talks to Rumaih M. Al-Rumaih, President of Public Transport Authority (PTA) & Acting President of Saudi Railway Organization, on teaming up with commercially committed partners, making sure the Kingdom's land and sea bridges are of the first order, and providing employment for all the Kingdom's inhabitants.
read articleInterview
Nabeel M. Al-Amudi, President, Saudi Ports Authority, and Minister of Transport
TBY talks to Nabeel M. Al-Amudi, Minister of Transport, and President of Saudi Ports Authority, on optimally restricting concession agreements, resolving bottlenecks in the logistics chain, and privatizing as rapidly as possible.
read articleInterview
Khaled Bin Abdullah Al Hogail, CEO & Managing Director , Saudi Public Transport Company (SAPTCO)
TBY talks to Khaled Bin Abdullah Al Hogail, CEO & Managing Director of the Saudi Public Transport Company (SAPTCO), on the importance of strong and rational regulations, knowledge transfers, and unifying public and private transportation networks.
read articleInterview
Imad El-Zein, CEO, Auto World-Sixt Saudi Arabia
TBY talks to Imad El-Zein, CEO of Auto World-Sixt Saudi Arabia, on growing market share in challenging circumstances, partnering with world-class players to boost its local presence, and combining better services with lower costs.
read articleInterview
Saleh H. Al-Ghamdi, Acting CEO, Saudi Air Navigation Services Company (SANS)
TBY talks to Saleh H. Al-Ghamdi, Acting CEO of Saudi Air Navigation Services Company (SANS), on maximizing safe and effective services, effectively increasing the rate of Saudization, and easing the pathway of women into the workforce.
read articleInterview
Khalil Kutubkhanah, CEO, Jeddah Development and Urban Regeneration Company (JDURC)
TBY talks to Ibrahim Khalil Kutubkhanah, CEO of Jeddah Development and Urban Regeneration Company (JDURC), on Jeddah's unplanned settlements, the company's redevelopment projects, and its partnership model with the private sector.
read articleInterview
Dr. Khalid Bin Mohammed Al Shaibani, Deputy Minister, Planning and Health & Director of the Vision Realization Office
TBY talks to Dr. Khalid Bin Mohammed Al Shaibani, Deputy Minister for Planning and Health & Director of the Vision Realization Office, on reforms within the Ministry of Health, the corporatization of healthcare provision, and transformations in care delivery.
read articleInterview
Mohanad A. Dahlan, CEO, University of Business and Technology (UBT) Company
TBY talks to Mohanad A. Dahlan, CEO of University of Business and Technology (UBT) Company, on the evolution of the company, education investments, and upcoming sectors that will need support from the sector.
read articleFocus: Universities
Broad and Deep
As part of the continuing decentralization of higher education in Saudi Arabia, individual universities are pursuing their own paths to grow their faculties, engage with various international stakeholders, and ultimately move toward a more privatized future.
read articleInterview
Rafique Izhiman, Area General Manager KSA Jeddah, Yanbu Hotels
TBY talks to Rafique Izhiman, Area General Manager KSA Jeddah/Yanbu Hotels & General Manager, Intercontinental Hotel Group (IHG), Jeddah, on the role the firm plays in the market, expanding its footprint in the country, and expectations for 2017.
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