Saudi property boom takes off

A proposed new mortgage law is expected to provide further stimulus to the expanding housing market later this year. As a result, some believe that the Saudi demand for homes could be shaping up to unleash the biggest building boom yet seen in Arabia.

Changing society

The fundamentals look promising as oil revenues continue to grow. With the growing needs of a young population the housing market is no longer focused on luxury villas and palaces but on the needs of a changing society.

The Kingdom's population of more than 20 million is the largest in the Gulf and current demand for housing far outstrips the supply with more than 70 per cent of the population aged under 30.

In the early 1980s almost all housing and real estate development was government sponsored. The situation is changing fast with the private sector leading and more than 50 companies alone licensed to sell and develop real estate in the Kingdom last year.

Another indicator of the Saudi construction boom is the expansion of the Saudi building materials industry with cement production expected to double to more than 90 million tonnes a year by 2010.

Economic cities

While existing cities and communities are already seeing major developments there is also an intense focus on the $150 billion worth of government sponsored investment that has been committed to new cities due to be built around a core of economic projects.

All of the economic cities will feature major residential and commercial real estate developments. Around 1.5 million people are expected to move to the new cities in the medium term and three times as many by 2020.

The region's big names are seizing the opportunity. Prince Alwaleed bin Talal al-Saud's Kingdom Holding Company, following on from its towering Al-Faisaliah development, is planning multi billion dollar real estate investments in both Riyadh as well as Jeddah.

The government's go ahead for construction of high-rise buildings in Jeddah is being seized upon by companies keen to develop sites overlooking the Red Sea.

Dubai's Emaar Properties, apart from its involvement in joint ventures to build the Kingdom's giant King Abdullah Economic City at Rabigh, is among a growing number of regional developers committed to residential developments in Saudi Arabia.

These include the Al-Khobar Lakes and Jeddah Gate projects. The latter involves a $700 million investment to build 5,000 homes on the 5 million square foot old Jeddah airport site.

Dubai's Damac properties has also decided to enter Saudi Arabia's fast expanding property sector with plans for a 40 storey tower block development on Jeddah's corniche. The intention is to establish a strong local presence in a number of Saudi cities Chief Executive Peter Riddoch says.

Major development of hotels and residential accommodation as well as new infrastructure development is also stimulating real estate markets in the pilgrimage cities of Mecca and Medina.