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29 March 2024

Shrinking family size to help Saudi housing sector

Kingdom’s population grew by around 2.6 per cent since 1992. (FILE)

Published
By Nadim Kawach

A steady decline in the average family size in Saudi Arabia means that more houses will be needed in the future and this will keep demand strong in this sector, the Gulf country’s largest bank said on Monday.

The shrinking size has been accompanied by a steady and rapid growth in the Kingdom’s population, recording a rate of around 2.6 per cent since 1992, National Commercial Bank (NCB) said in a study sent to Emirates 24|7.

The study was commenting on recent Saudi census results which put the population in the world’s dominant oil power at 27.1 million in April compared with 22.67 million in September 2004 and around 16.95 million in mid 1992.

This means there was an increase of about10.19 million between 1992 and 2010. The long-term growth in the population came out at 2.65 per cent per year between 1992 and 2010, almost matching that of the real GDP growth of 2.64 per cent achieved in the same period, according to NCB.

It said these results implied that prudent macro-economic policies are paying dividend to the society at large where the economy and population are both moving up in the same direction thus spreading prosperity in line with the economic development targets.

Although the population growth in the Kingdom accelerated to 3.03 per cent annually during the boom period of 2004-2010 due to the influx of expatriate workers, this trend will likely slip back to more normal levels after the completion of development projects, the study said.

“With regard to the policy of providing shelter, the supply of housing units continued to expand in line with the population growth and rising per capita income….the stock of occupied housing units increased from 2.79 million dwelling units in 1992 to 4.64 million units in 2010, suggesting a yearly incremental demand of 103,000 houses,” NCB said.

“The average family size narrowed from 6.08 persons per house in 1992 to 5.84 persons per house in 2010…..the changing demographic pattern would tend to keep demand for residential units growing, which would benefit entities engaged in the business of building materials, construction and mortgage finance.”

Saudi newspapers said this week the Kingdom, which controls over 20 per cent of the world’s recoverable oil deposits, is planning to pump in excess of SR100 billion (Dh99 billion) into projects to build nearly one million houses for citizens to meet surging demand within its current five-year development plan.

Housing supply shortages because of high population growth have kept rents in Saudi Arabia at record high levels and stoked inflation in the country.

Officials and experts in the Kingdom hopes the approval of a long-awaited planning mortgage law would help tackle the supply problem, push rents down and spur local banks into resuming normal lending after more than a year of lending tightness because of the global fiscal crisis and regional defaults.

According to Hassan Akeel, Undersecretary of the Ministry of Trade and Industry, the mortgage law has become crucial to stabilize the property and construction sector, which he described as one of the most important components of the gross domestic product in the world’s dominant oil power.

Akeel did not specify when the mortgage law would be issued but said it would bridge a widening gap between housing demand and supply.

“The mortgage law is intended to expedite the cycle of real estate investment and this will reduce the vast housing gap in the Kingdom,” he said.

“The pillars of the real estate market in the country in the coming period will based on growth in domestic demand, correction of prices, and the approval of the mortgage law which will help curtail price rises…we also expect a decline in the prices of building materials, a continuation of government construction projects and an acceleration of bank credit to the property sector.”