JLL: Why Affordable Housing Matters?
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The road to home finance has been a long one for the Kingdom, but with its highly anticipated mortgage law edging ever closer to ratification, would-be homeowners and financial institutions are gearing up for a new era of opportunity.
With the announcement this year of a US$66.7 billion initiative to address the demand-supply imbalance in the Kingdom’s housing market, social infrastructure spend is topping the Government agenda as it focuses on building affordable homes for the future.
The South-East Asian island has seen a number of distinctive developments come to fruition over the past few years as the country further establishes itself.
While there is currently a significant over-supply of upscale or luxury housing in many markets, there remains a shortage of more than 3.5 million affordable dwellings across the major markets within MENA.
The demand for affordable housing is forecast to increase ahead of the suppply in all major markets over the next 5 years, resulting in a widening of the current gap. Delivering sufficient product to meet this growing need constitutes one of the major opportunities for the real estate industry in the region over the next few years.
While the largest current shortfall is concentrated in four markets, Egypt (1,500,000), Iraq (1,000,000), Morocco (600,000) and Saudi Arabia (400,000), there is a shortage in all of the markets studied, with the GCC markets of the UAE, Bahrain and Oman also requiring more dwellings in this sector of the market.
A number of factors have contributed to the inability of the development industry to provide a sufficient supply of affordable housing. These include:
- High land values / lack of access to affordable land.
- High capital costs associated with 'big ticket' infrastructure (eg: electricity, sewerage).
- Costs associated with providing multi modal public transport networks to remote locations.
- Low financial returns compared to other sectors of the residential market.
- Problems with acceptance of system building techniques have restricted economies of scale.
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