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A rise in the supply of residential units is poised to make them more affordable to citizens and foreign investors, ultimately increasing home ownership rates, said PwC partners in a report (pdf) on Sunday. The government is set to make available 300k new residential units in three cities by 2025, said Minister of Municipal and Rural Affairs and Housing, Majed bin Abudllah Al Hogail, and there are now 141k units under construction across the Kingdom.
Off-plan models contribute to affordability: The report claims that the model, under the government’s housing program, has contributed to speeding up home ownership, reducing costs as compared to ready-made units, and is boosting supply by stimulating competition between real estate developers.
Regulating the off-plan industry: The government has taken strides to better regulate the off-plan sale and rent industries. The Wafi programme (pdf), launched in 2019, regulates off-plan property sales through a set of rules and systems that hold both parties accountable.
BACKGROUND- A new law regulating off-plan property sales and rentals will go into effect on Thursday, 4 April. The law, which we covered in detail on 8 January, regulates the sale and rent of real estate being developed through off-plan sales. That’s industry-speak for units that are built after reservations and down payments from buyers.
Home ownership KPIs: The national housing program has contributed to an increase in home ownership to 60% by the end of 2022, up from 47%. The report doesn’t provide information on the comparison period. The ministry also aims to raise the ratio of home ownership to leased units to 70% by 2030 by “providing affordable and quality housing for Saudi families.”
By the numbers: Off-plan property sales have been gaining steam in recent months, growing 52% y-o-y in 1H 2023, according to Arab News. Some 47 off-plan sales projects were licensed in the first six months of 2023, according ministry figures.
It’s not without challenges: The housing sector faces hurdles including high unit costs, scarcity in supply, inadequate contractor due diligence and feasibility studies, restricted financing alternatives, and a shortfall in private sector involvement.
Making off-plan units more attractive: The report claims that establishing off-plan projects far from city centers and essential services is a key challenge facing the industry. It also urges developers to work on shifting the consumer culture to opt for off-plan purchases by educating them on their affordability. Liquidity pressures on lenders are another obstacle where there’s rising demand for liquidity to complete off-plan projects. Focusing on affordability, ensuring quality, and providing diverse financing options could also boost the industry, the report reads.
