Future demand for affordable housing in Saudi Arabia will provide significant opportunities for both developers and investors over the next few years, according to the latest MENA (Middle East North Africa) House View report published by Jones Lang LaSalle, the world's leading real estate investment and advisory firm. Saudi Arabia faces a potential shortfall of up to one million housing units in the Kingdom over the next three years, driven by demand from the kingdom's young, fast growing and rapidly urbanizing population. This demand for new space is not currently being matched by the supply of quality residential accommodation at affordable prices. “Saudi Arabia is a market with huge potential but affordability remains the main challenge that needs to be overcome,” said John Harris, head of KSA operations for Jones Lang LaSalle MENA. “There is currently a pricing mismatch between what the market is delivering and what most potential purchasers can afford to pay for their housing. Affordability will unlock the undoubted latent demand for additional housing, converting this into actual demand and increased sales activity.” To meet the affordable housing challenge, Jones Lang LaSalle has identified four sets of criteria that need to be addressed to provide sufficient affordable housing in the Kingdom: q Home Finance: Increasing the level of home finance is critical for the development of affordable housing. The approval of the much awaited mortgage law will also give a much needed boost to the market. q Community Planning: An affordable housing format has to be appropriate and acceptable to the local population. Community planning needs to be improved to create a better balance between utility and social preferences. q Engineering: Project costs can be reduced by applying innovative building technologies and economies of scale. Such practices will improve affordability and increase the supply of lower cost units. Initiatives by a Saudi institution to develop an integrated building system will certainly result in higher construction quality, reduce project cycle times and ultimately higher affordability. q Business Models: Innovative business models need to be adopted involving greater cooperation between the government and major private sector developers. Currently, there are hardly any public private partnerships (PPPs) in the Kingdom's housing development initiatives. Compared to other major real estate markets around the world, Saudi Arabia continues to offer an attractive long-term opportunity, with investors expecting to be the first market in MENA to recover from the current downturn, the report said. Jones Lang LaSalle also expects the Kingdom to be one of the strongest performing real estate markets in the region over the next 12 to 24 months, being the only market where investors expect prices to increase rather than decrease during the same period. Commenting on the Saudi market generally, Abdullah Faadhel, business development director for Jones Lang LaSalle, said: “These observations are based on our local and regional knowledge balanced with global best practice. Saudi Arabia's real estate market offers investors and developers significant opportunities. Given the generally worsening investment climate in the region, the focus is firmly shifting to the Kingdom where stronger fundamentals and sentiment offer more secure prospects in the medium term.” The population of Saudi Arabia has risen to just over 25 million, according to an official estimate. The Central Department of Statistics and Information estimated the population at 25.37 million, of whom 18 million are Saudis. The last census in 2004 put the total at 22.6 million, of whom 16.5 million were Saudis. A government official said the next census would be conducted next year. Analysts and diplomats say providing jobs and housing for the rising population is one of the main challenges facing the Kingdom. Saudi Arabia has pledged investments worth $400 billion to diversify its economy and create new jobs outside the oil industry. It plans a mortgage law by the end of the year to boost home ownership. __
