A shortage of housing and rising land costs are causing house prices in Saudi Arabia's two largest cities to rise while an increase in new office space will push rental rates lower in Riyadh, ,” CB Richard Ellis said in a report. “The sheer pressure of population growth, increases in construction costs and the shortfall in development are likely to force house prices slightly higher in Riyadh in the short term,” the report noted. House prices in Saudi Arabia's second largest city, Jeddah, have also risen in the past 12 months as the city of 3.5 million faces a shortage of around 300,000 homes, the report said. While most of the demand for housing in the kingdom comes from low income individuals, the absence of a mortgage law and lack of financing is preventing developers from building for that segment of the population. With a growing population of over 25m, 70 percent of which are under the age of 30, the world's largest oil exporter will need to build 1m new homes by 2014, HSBC said last year. “Developers cannot build the low-cost or ‘affordable' housing desperately needed by large sections of the population when they know that this section of the population cannot afford the finished products,” CB Richard Ellis said. Saudi Arabia's mortgage law has been in the planning stages.
