Economy

Saudi housing costs rise but inflation remains steady

June 17, 2024, 12:12 PM

Saudi housing costs rose nearly 9% year on year in May

Housing costs up 9% in May
Overall inflation stays at 1.6%
Fuel and utility prices rise

Housing costs in Saudi Arabia rose nearly 9 percent year on year in May, but it was not enough to push overall inflation in the kingdom over 2 percent.

The latest data from the General Authority for Statistics showed the annual inflation rate in Saudi Arabia was 1.6 percent in May, having remained at this rate since March.

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The bulk of the yearly increase was due to housing, water, electricity, gas and other fuel prices rising 8.7 percent compared to May 2023.

This was offset by tobacco, clothing and footwear, housing furniture and equipment, transport and communications costs all falling.

Housing costs are likely to continue to rise in the coming months.

AGBI reported earlier this month that a greater supply of affordable housing and a growing resignation among prospective house buyers that interest rates are unlikely to fall substantially is helping to propel a rebound in new residential mortgages in Saudi Arabia.

Under Vision 2030, Saudi Arabia set a target to increase home ownership among the kingdom’s adult citizens to 60 percent by 2020 and to 70 percent by the end of the current decade – from 47 percent previously.

“A lot of potential homeowners had been waiting for interest rates to decline, but now many believe rates will remain higher for longer and even if rates do fall eventually, it won’t be to the levels we saw a few years ago,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.

Malik added that prospective Saudi homeowners are “getting used to mortgage rates being higher”.