Saudi Banks Grant Residential Mortgage Loans Worth $2 Billion in January 2024
In a record-breaking month, banks in Saudi Arabia provided residential mortgage loans totaling SR7.54 billion ($2 billion) to individuals in January 2024. This marked an 11-month high, as reported by the Kingdom’s central bank.
Driving Factors Behind the Surge in Residential Mortgage Loans
The substantial increase of 21 percent, equivalent to SR1.3 billion more than the previous month, can be attributed to various government initiatives aimed at enhancing access to finance, introducing affordable housing options, and improving operational efficiencies in the housing sector.
Residential Loans Allocation Breakdown
Out of the total loans granted, 68 percent (SR5.13 billion) was allocated for house purchases, representing a 19 percent increase from the previous month. Apartments accounted for 26 percent of the loans, totaling SR1.97 billion, with a growth rate of 17 percent during the same period.
Land Purchase Loans See Significant Growth
Despite comprising the smallest share at 6 percent, new loans for land purchases recorded the highest growth rate at 73 percent, reaching SR440 million in January.
Initiatives Driving Saudi Housing Sector Transformation
Key initiatives such as the Saudi Real Estate Refinance Co. and Sakani are playing a crucial role in aiding citizens in owning their first home and boosting liquidity in the real estate market. The waiver of value-added tax and the introduction of the White Land Tax are also contributing to the sector’s growth.
Challenges and Market Trends
Affordability concerns due to rising interest rates and borrowing costs have led to a 10 percent decrease in new residential bank loans compared to the same period last year. Despite this, real estate prices for villas and apartments continue to rise, impacting transaction volumes in key cities like Riyadh and Jeddah.
Future Outlook and International Investments
Saudi Arabia’s initiatives to attract international investments, including the premium residency visa program, aim to diversify the economy and prioritize top-tier housing. A survey by Knight Frank revealed strong interest from high-net-worth individuals in owning real estate in the country, highlighting potential opportunities for the banking sector.