In August 2023, residential mortgage lending in Saudi Arabia experienced large growth. According to the Saudi Central Bank (SAMA), residential mortgage lending surged by 31.7% compared to the previous month.
SAMA's recent Monthly Bulletin Aug 2023 statistics report shows that mortgage lending for houses, apartments, and lands reached SR7.14 billion ($1.9 billion) in August, up from SR5.43 billion ($1.45 billion) in July.
APARTMENTS TAKE THE LEAD
A notable highlight is the significant increase in apartment lending. Banks injected SR1.78 billion into this segment in August, marking a robust 45% increase over July. This shift comes after a slowdown in prior months, signalling a change in lending patterns.
FACTORS BEHIND THE SHIFT
A variety of factors and market conditions are influencing a shift from houses to apartments. An increased focus on urban development, infrastructure investments, and evolving demographics have made apartments more attractive to both homebuyers and renters.
IMPACT OF POLICY CHANGES
This dynamic shift aligns with the Shoura Council's call to review policies by the Real Estate Development Fund and should have a significant impact on the housing market. These changes will create new opportunities for citizens to become homeowners.
Within the report, economist Talat Zaki Hafiz attributes the surge in apartment financing to the rising prices of houses. This is making them unaffordable for average-income individuals. In contrast, apartments offer a more accessible and affordable option.
While apartments have gained popularity, financing for houses still dominates Saudi banks' new residential mortgage landscape, constituting 70% of mortgages in August. Apartments represent 25% of the market, with land financing making up the remaining 5%.
CHANGES IN MORTGAGE MARKET SHARE
When it comes to finance companies, a significant shift occurred in August 2023. Apartment financing now holds a large 57.6% share of total new mortgages granted by finance companies. This changes the previous dominance of house mortgages.
The trend toward apartment ownership reflects a changing landscape driven by lifestyle preferences, affordability, and current interest rates. It aligns with the broader goals of Saudi Arabia's Vision 2030, including housing sector reform and improved housing access for Saudi families.
ROLE OF APARTMENTS IN SAUDI VISION 2030
As Saudi cities continue to grow and modernize, the housing market will undergo further changes. SAMA highlights that apartments will continue playing a key role in these changes, shaping the future of housing in the Kingdom. This is in close alignment with Saudi’s Vision 2030 of creating vibrant communities and shaping Saudi society.