In the backdrop of shortage of total 3.5 million affordable housing units in MENA, the Kingdom of Saudi Arabia has an estimated shortfall of 400,000 affordable homes, according to Jones Lang LaSalle.
Jones Lang LaSalle, the world’s leading real estate investment and advisory firm, has published a special report highlighting Saudi government’s plans to provide more dwellings as part of its broader $133 billion financial and social stimulus package.
Focusing on seven major markets, the report confirmed that whilst governments across the region in the recent past have been increasing their attention on the supply of new homes, demand is far out-stripping supply as the region experiences population growth around twice the global average. With a young and fast growing population, the report estimates that there remains a combined shortage of more than 3.5 million affordable dwellings across the major markets within MENA and that demand will continue to outstrip supply for at least the next five years. The extent of this shortfall varies from more than 1.5 million units in MENA’s most populous market (Egypt), to just 15,000 units in the Sultanate of Oman.
“As focus shifts away from top-end luxury development, Jones Lang LaSalle estimates that the provision of sufficient levels of affordable housing represents probably the single greatest opportunity for the real estate industry in MENA at the present time,” Deepak Jain, co-author of the report and head of Jones Lang LaSalle’s specialist team of experts on affordable housing, said.
“There is currently a marked shortfall of such housing in all the major markets across the region and this shortage is forecast to increase as governments respond to the need to provide sufficient levels of affordable housing to address one of the key social issues facing their respective populations,” he added.
Highlighting the demand of affordable housing units in other six core markets, in addition to KSA, the report said that Egypt has the highest current shortfall of affordable housing in the region. The government has recognised this problem and has made a provisional commitment to construct one million affordable new residential units across 32 cities.
Talking about Iraq, the report said thirty years of conflict and underinvestment have created a major housing shortage across the whole of the country. “The National Investment Commission has recently been mandated to construct 1 million economic housing units with as many as 430,000 housing units expected to be completed by the end of the first quarter 2012,” it added.
Morocco has the most mature affordable housing market in the region. “Despite the introduction of a wide range of government initiatives, including tax rebates for private developers, there remains an estimated shortfall of 600,000 affordable homes,” the report explained.
In Bahrain, the recent $10 billion GCC stimulus package includes affordable housing where there is estimated for 40,000 additional dwellings. The UAE government has recognised the need for more affordable housing with an estimated shortfall of about 20,000 new dwellings, predominantly in Abu Dhabi where the lack of affordable housing has resulted in high levels of shared accommodation.
The Sultanate has an estimated shortfall of about 15,000 dwellings and provision of affordable housing will form part of a Government programme following completion of a number of major infrastructure projects.
The real estate industry has generally failed to provide sufficient affordable housing to meet the required demand. In highlighting the issues which have inhibited the level of supply, the report highlighted six key factors include high land values which have reduced access to affordable land; high capital costs for associated infrastructure development such as electricity and sewerage; costs in providing suitable multi-modal public transport access to remote locations; low financial returns compared to other residential sectors; limited access to suitable finance for low income families due to generally immature mortgage markets and low acceptance of system building techniques amongst property developers that would create appropriate economies of scale which would create better margins.