In a notable development, residential mortgage lending in Saudi Arabia witnessed a substantial surge in August. Compared to the previous month, residential mortgage lending increased by 31.7 percent according to Saudi Central Bank’s (SAMA) data.
SAMA’s recent report reveals that mortgage lending for houses, apartments, and lands saw a remarkable increase to SR7.14 billion ($1.9 billion) in August, up from SR5.43 billion ($1.45 billion) in July.
Apartment lending takes the spotlight
What is particularly interesting is the significant growth in apartment lending. Â Banks injected SR1.78 billion into this segment in August, reflecting a robust 45 percent increase over July. This upward trend comes after a slowdown in the preceding months, indicating a noteworthy change in the lending landscape.
The shift in lending dynamics between houses and apartments has been influenced by various factors and market conditions. The emphasis on urban development, investments in infrastructure, and changing demographics have made apartments more attractive to homebuyers and renters.
This shift in dynamics coincides with the Shoura Council’s call for reviewing policies by the Real Estate Development Fund. These changes are expected to have a significant impact on the housing market. They will provide new opportunities for citizens to fulfill their dreams of owning a home.
Economist’s perspective
Economist Talat Zaki Hafiz notes that the increase in apartment financing can be attributed to the rising prices of houses. This has made them unaffordable for average-income individuals. On the other hand, apartments are more accessible and affordable.
While apartments have gained popularity, financing for houses still dominates Saudi banks’ new residential mortgage landscape. They constitute a 70 percent share of mortgages in August. Meanwhile, apartments make up 25 percent of the market, and land financing represents the remaining 5 percent.
The mortgage landscape further evolves when it comes to finance companies. Previously, house mortgages held a 70 to 80 percent share of total new mortgages granted by finance companies. However, the scenario changed significantly in August 2023, with apartment financing commanding a substantial 57.6 percent share.
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Future prospects
 The shift toward apartment ownership suggests a changing trend in the lending landscape. This shift is driven by factors such as lifestyle preferences, affordability, and current interest rates. Thus, it aligns with the broader goal of Saudi Arabia’s Vision 2030. One of the main goals is to reform the housing sector and improve access to housing for Saudi families.
As Saudi cities continue to grow and modernize, the housing market is likely to witness further changes. Furthermore, apartments will keep playing a significant role in shaping the future of housing in the Kingdom. Vision 2030 acknowledges the central role of housing in building vibrant communities and shaping Saudi society.
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