Mortgage lending provided by financing companies has reached an all-time high by the end of the third quarter of 2024 amid developments in Saudi Arabia’s real estate sector.
According to data from the Saudi Central Bank (SAMA), the companies issued approximately SAR 28 billion ($7.4 billion) in real estate loans.
The data indicates that corporate borrowers accounted for SAR 5 billion, while individuals received SAR 23 billion. Additionally, financing companies in the Kingdom reported their highest net income since 2022 during the third quarter, amounting to SAR 768 million ($204.5 million).
Mortgage loans from commercial banks also rose for both individuals and companies, recording a 13% year-on-year increase to SAR 846.48 billion ($225 billion) by the end of Q3, compared to SAR 747 billion ($199 billion) during the same period in 2023. Of this, individual loans comprised 77.6% of the total, amounting to SAR 657 billion—an 11% annual increase—while corporate loans represented 22.4%, growing by 22%.
Commenting on the market’s growth, Mohammed Al-Farraj, Senior Director of Asset Management at Arbah Capital, told Asharq Al-Awsat that “the Saudi real estate market is experiencing unprecedented momentum, driven by a significant increase in mortgage lending to individuals by financing companies. Last year witnessed record growth in this type of lending.”
Al-Farraj predicts the upward trend in the mortgage financing market will continue into 2025, with a projected 12% growth. He attributes this to reduced interest rates, rapid economic growth, rising purchasing power, increased consumer confidence, successful government housing policies, a broader variety of real estate products, and growing demand for housing. He also anticipates that this growth will stimulate economic activity and increase demand for various goods and services.
The US Federal Reserve has played a significant role in the global economic climate by cutting interest rates three consecutive times between September and December 2024, reducing them by approximately 100 basis points to a range of 4.25%-4.5%.
Saudi Arabia has placed considerable emphasis on the mortgage market to enhance liquidity in the real estate financing sector. Several agreements and memorandums of understanding (MoUs) have been signed to develop and strengthen this vital sector.
The Saudi Real Estate Refinance Company (SRC), wholly owned by the Public Investment Fund (PIF), recently signed an MoU with Hassana Investment Company to develop the market, attract local and international investors, and expand the secondary real estate market.
Additionally, SRC signed an agreement with US-based BlackRock to enhance mortgage financing programs in the Kingdom and increase institutional participation in capital markets. In November, it entered an MoU with King Street, a capital management firm, to activate initiatives aimed at creating a sustainable ecosystem for mortgage refinancing.
