There is still much work to be done.
Offering government guarantees to
real estate financiers is not the answer,
the Al Mazaya Weekly Report believes,
as it creates an unhelpful sense of
security for lenders that lessens the
imperative to innovate and ensures
a focus remains on lending for high-
end, high-yield developments, leading
eventually to a high rate of inflation.
It is important financiers and other
lending institutions in the Gulf are
encouragedtofindwaystotailorproducts
to mid-market buyers and developers,
independent of the public sector.
Mazaya Monthly Real Estate Report - April 2014
3
It is right these initiatives should
be driven by the private-sector,
within
parameters
approved
and
regulated by public-sector bodies.
It is of paramount importance, too, before
mortgage lending can be effectively
modernised, that Saudi Arabia and the
other Gulf countries find ways to ensure
landpricesarevalued impartiallyand fairly.
To do this, bodies mandated by the public
sector to act as official arbiters of land
values must be established and licensed.
After all, it is impossible toachieveaclearly
defined and responsible environment
for real estate lending when land values
are apportioned whimsically or on
nothing more concrete than sentiment.
It is expected this year in Saudi Arabia,
where demand for affordable housing
is enormous, mortgage lending will
increase by more than five percent,
demonstrating the market’s appetite
for borrowing at all levels of society.
Given real estate spending in Saudi
is expected to increase by 35 percent
to 500bn riyals in the coming twelve
months, the opportunities for lenders
who can find the right mechanisms
to allow as many borrowers as
possible to come to market are clear.
Transparent pricing of land brings
market stability, which in turn brings
buyers, sellers and developers to
market. In this type of financial
environment, effective mortgaging –
providing up to 70 percent of property
values – can become a vital lubricant
for the wheels of real estate commerce,
allowing all parties to benefit.
Effective mortgage systems that are
truly accessible to most sections
of society, it must be stressed,
will not pour cold water on the
Gulf’s property sector, far from it.
Rather, it would achieve the
opposite: allowing the market to
grow sustainably, for the long term,
avoiding bubbles and other pitfalls
