Saudi to allocate SR100bn for 1m new houses

Saudi Arabia is planning to pump more than SR100 billion (Dh99bn) into projects to build nearly one million houses for citizens to meet surging demand within its current five-year development plan to be endorsed shortly.

The Saudi Arabic language newspaper Alriyadh published what it said was a general guideline of the kingdom’s ninth development plan for 2010-2014, which it said would be approved by the cabinet within a few days.

The massive blueprint, which is expected to involve record high public expenditure and investments, aims to increase the GDP per capita income from around SR46,200 in 2010 to SR54,200 in 2014.

Around SR731bn would be earmarked for development of human resource, including education and training, more than 50 per cent of the total development allocations of around SR1,444bn.

“As for municipal and housing services, the five-year plan aims to build one million housing units to meet nearly 80 per cent of the projected demand within the next five years. More than SR100bn will be invested in this sector, an increase of around 64 per cent over the previous plan,” Alriyadh reported.

“The General Housing Authority has been asked to devise a strategy for housing in the kingdom, including the creation of a housing data base.”

Like other Gulf oil producers, Saudi Arabia has been reeling under a housing supply shortage because of high population growth and strong demand by companies and other investors during the latest oil boom.

The shortage has sharply boosted rents, which allied with the weakening US dollar, a surge in global commodities prices and other factors to stoke inflation in the world’s dominant oil power. Inflation climbed to a record annual high rate of around 9.9 per cent in 2008 before falling by nearly half last year.

Banks and other institutions in the kingdom believe inflation will remain under control this year and in 2011 but that housing shortages will keep it high.

According to Saudi Arabia’s largest bank, National Commercial Bank (NCB), the kingdom needs to construct nearly 158,000 houses every year between 2010 and 2020 to meet a population growth of at least two per cent.

“This means the kingdom needs to build a total 1.58 million new housing units. Investments required for these projects are estimated at nearly SR79bn annually,” NCB said in a recent study.

Alriyadh did not specify the total projected spending in Saudi Arabia’s ninth development plan but analysts expect it to be far higher than the eighth plan, which involved record high expenditure as Saudi Arabia basked in one of its best financial years due to high oil prices and production.

Official data showed overall public spending in the 2005-2009 plan totaled around SR2.2 trillion, nearly SR1trn above the previous plan expenditure of around SR1.2trn.

The surge in spending and the record fiscal surpluses achieved in the 2005-2009 plan were a result of a sharp growth in the country's revenues, which more than doubled to SR3.4trn from around SR1.3trn in the preceding five-year plan, according to the Saudi Arabian Monetary Agency (Sama), the kingdom's central bank.

The rise of nearly SR2.1trn in revenues during the eighth plan was due to a sharp rise in oil prices and high output by the kingdom, which controls nearly a quarter of the world's recoverable crude resources.

Official figures showed Saudi Arabia pumped an average 8.7 million barrels per day during that plan compared with around eight million bpd in the previous plan. Crude prices also averaged around $64 a barrel in the 2005-2009 plan against only about $26 in the preceding plan.

Announcing the eighth development plan five years ago, Riyadh said it represents a major landmark in the social and economic development path of the kingdom, as it is the first five-year plan prepared in the context of a long term development strategy with definite targets and objectives.

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