Saudi Arabia’s housing plan tests kingdom’s reform drive
Saudi Arabia wants to reduce the cost of an average home by 2020 to five times the average annual income, down from 10 times the yearly salary in 2015.
For many like Abdullah, a 39-year-old father of three with a rented apartment in Riyadh, this has delayed the dream of building his own home on the city’s outskirts. After more than a decade on a waiting list for an interest-free loan from the kingdom’s Real Estate Development Fund, Abdullah says it referred him to a commercial bank to take out a mortgage worth 445,000 riyals ($119,000).
He used the money to start building a house on a 350,000 riyals parcel of land for which he took a separate bank loan, but construction had to be halted in May after he ran out of money. Set up in 1974, the Fund is a government entity linked to the housing ministry, and covers about a quarter of Abdullah’s monthly mortgage payment. But Abdullah says he is still left struggling to pay off both loans that eat up roughly half his monthly income of 20,000 riyals ($5,300) amid rising living costs. “The [mortgage] system is destroying the middle class, it is suffocating us,” he told AFP outside his half-finished home, urging a return to the interest-free loans.
‘Makes me angry’
Boosting home ownership is one of the key cornerstones of Prince Mohammad’s Vision 2030 reform programme. Nearly half of the country’s 20.7 million Saudis owned their own home in 2017, with hopes of reaching 70 percent by 2030. The kingdom also wants to reduce the cost of an average home by 2020 to five times the average annual income, down from 10 times the yearly salary in 2015.
Saudi Arabia has only a single digit mortgage penetration, one of the lowest among G20 countries, according to the Arab News daily. The housing ministry, which has announced multiple housing schemes to alleviate the crisis, says it seeks to increase total mortgages to 502 billion riyals ($134 billion) by 2020, up from 290 billion riyals ($77 billion) in 2017. But some Saudis are pushing back, voicing resentment over continued state spending on grand projects like NEOM, a planned $500 billion mega city in the kingdom’s northwest, while many cannot afford homes.
“Where is the 250 billion riyals?” has been a recent refrain on social media. It refers to the $67 billion allocated to the housing ministry in 2011 by the then King Abdullah, apparently to address popular discontent as Arab Spring protests swept the region.
For Majid, who waited for years for a loan from the Fund, the current scenario means he can only rent a small place rather than purchasing a house. “When my eight-year-old daughter has to change her clothes in front of her brothers, I feel ashamed I don’t have a bigger house of my own,” Majid told AFP, requesting that his real name be withheld. “It makes me angry.”