Banks grant SAR 567 billion as real estate loans to individuals ‎during Q1‎

Real estate loans to individuals from commercial banks increased by 19% year-on-year during the first quarter of 2023 and recorded a quarter-on-quarter increase of 3.1%, as the rise in residential real estate prices and the rise in interest rates led to a decrease in the pace of acceleration in demand for real estate loans, while the total real estate loans provided to individuals by commercial banks until the first quarter of 2023 reached about 567 billion riyals.

The Central Bank of Saudi Arabia’s reduction of the advance payment – the first payment as a condition for obtaining real estate financing for individuals – from 30% to 15% and then 10% with the low interest rates since January 2018 until now contributed to the improvement of real estate loans provided to individuals from commercial banks and financing companies, in addition to To some government policies that stimulate housing ownership for citizens, such as subsidized financing, which supported the rise of the real estate price index during the period.

The Ministry of Economy and Planning suggested that the coming period will witness a lull in real estate exchanges and real estate prices due to the size of the residential sector. In the report of the first quarter of 2023, the ministry attributed this situation to the size of the residential sector in the real estate price index and its leadership in real estate demand in the past quarters.

According to the report, real estate prices were affected by the acceleration in granting mortgages to individuals and government policies aimed at home ownership, which supported their rise.

She pointed out that despite the increase in the real estate price index in the first quarter of 2023 on an annual basis, it declined on a quarterly basis after a series of quarterly rises, indicating that it is noted that the escalation of interest rates has contributed to reducing the demand for real estate, mainly residential ones. This was evident in the decline in the number and values of residential real estate deals

The residential real estate demand was affected after the decline in the number of real estate deals in the Kingdom by 34% on an annual basis and by 6.7% on a quarterly basis to record 45.9 thousand deals, and despite the decline in real estate demand, residential lands still take the largest share in terms of the number of deals.

The residential real estate financing activity also topped the financing portfolio for the funded activities by 30% for the first quarter of 2023, with the total number of contracts for financing new residential real estate for individuals amounting to more than 30 thousand, with a volume of financing amounting to about 23 million riyals, as the number of villa contracts reached about 16 thousand contracts, the number of apartments contracts about 6 thousand contracts, the number of land contracts amounted to more than a thousand contracts.