Saudi real estate loans fall for the first time in 6 years

The total value of real estate loans provided by Saudi banks in the second quarter of 2016 dropped for the first time in six years, according to a report by Arabic newspaper Al Eqtisadiah.

The overall value of real estate loans during the quarter was 191.8 billion Saudi riyals ($ 51.8 billion), down 1 percent compared to the same period the year before, the report said.

While real estate loans to individuals increased 1.8 percent quarter-on-quarter to reach 108.2 billion Saudi riyals, a 4 percent drop in loans to companies brought down the overall sector.

In March 2016, Saudi central bank raised home buyers’ loan-to-value limit to 85 percent, according to Reuters, in order to address the lack of affordable housing for young people in the kingdom. The growth in total real estate loans started slowing down towards the end of the third quarter of 2014, according to the Saudi newspaper, to hit its first decline this year.

Individual property loans still take up the majority of property loans in Saudi, registering 56 percent of the total loans by the end of the second quarter of 2016.

This trend looks set to continue as the total value of real estate deals in the kingdom dropped 20 percent during the first half of the year, the report added.

source: Zawya