Saudi Arabia’s austerity drive is increasingly pressuring its people’s ability to buy their own homes, possibly pushing down housing prices by nearly a third, reported Reuters on Tuesday, quoting real estate consultancy JLL.
“Because of a lack of affordability and purchasing power — and now as we see, reduction of salaries for government employees – we foresee further pressure on affordability,” told Jamil Ghaznawi, Country Head of JLL in Saudi Arabia, Reuters.
Due to low oil prices and the resulting pressure on the kingdom’s national budget, the government has resorted to cut spending, just last month cutting allowances for employees in the public sector, a field where about two-thirds of Saudis are employed.
Despite a housing gap of approximately one million units, prices for low to mid income housing could drop by around 30%. Housing and land prices have already dropped by 10% and would decline further in the process of prices pulling back from their inflated levels, according to Ghaznawi.
He further claims that despite the country’s efforts to provide housing, the reduction of purchasing power and a lack of credit and mortgage facilities has led to a slowdown in construction as buyers simply cannot afford the units.