Saudi bank loans rose 11% to $712 billion in March due to real estate activities
RIYADH: Saudi banks lent SR2.67 trillion ($711.5 billion) in March, an 11 percent increase compared with the same month in 2023, according to the latest official data.
Data released by the Saudi Central Bank, also known as SAMA, showed that personal lending accounted for 35 percent of this growth, while the remaining 65 percent went to the corporate sector, particularly with real estate activities. -With electricity, gas and water. supply.
Real estate financing for corporate deals in particular increased by 27 percent in the third month of 2024, reaching SR275.2 billion, marking the highest annual growth rate in 10 months.
A study by Mortar Intelligence, which used 2023 as the base year, estimated the Kingdom’s real estate market to be worth $69.51 billion in 2024, and expected it to reach $101.62 billion by 2029, between 2024 and Growing at a compound annual growth rate of 8 percent between 2029. ,
The growth in real estate and construction efforts has increased the need for debt-based financing obtained primarily from the local banking sector. Saudi banks play a central role in providing loans for real estate projects.
New retail residential mortgage loans saw significant growth, reaching a 14-month high of SR7.63 billion in March, according to SAMA data. This represents an increase of 5 percent over the amount given in the same month last year and 10 percent over the previous month.
In March, lending for home purchases had the largest share, comprising 64 percent of new mortgages granted to individuals, totaling SR4.91 billion. However, the most notable growth was seen in apartment loans, which increased by 28 percent to SR2.24 billion. Meanwhile, land lending saw a more modest growth of 4 percent, reaching SR474 million in new mortgages.
A factor contributing to this growth may be government initiatives aimed at modernizing the financial system as well as the need for residential properties from immigrants coming into the state.
In a study conducted in March by Knight Frank, a notable trend emerged among expatriates, with 68 per cent expressing a strong preference for owning an apartment rather than a villa. This trend was particularly prominent among individuals aged 35–45 and 45–55.
The increase in loans to electricity, gas and water supply came as the second contributor to corporate debt after real estate, registering an annual increase of 27 per cent to reach SR147.42 billion in March.
According to Global Data’s April report, the major sectors in Saudi Arabia’s electricity market are residential sector, commercial sector, industrial sector and others. In 2023, the residential sector had the dominant share in the electricity consumption market.
The US International Trade Administration also said in a January report that Saudi Arabia has experienced rapid economic and population growth since the discovery of oil. The population is projected to increase to 40.1 million by 2030.
Due to limited water resources, the country continues to invest in desalination facilities to meet growing water demand, with the goal of providing 2.18 billion cubic meters of desalinated water per year.
The Ministry of Environment, Water and Agriculture has reportedly allocated $80 billion for water projects, with the market for waste water treatment services also continuing to grow. In 2021, Saudi Arabia built 133 wastewater treatment facilities, an increase of 14.66 percent from the previous year.
SAMA data also showed that financing for professional, scientific and technical activities increased by 54 percent, reaching SR6.4 billion, the highest annual growth rate among the sectors.
Education loans also saw strong growth, reaching SR6.27 billion, an annual increase of 28 percent. Additionally, funding for administrative and support service activities increased by 20 percent, totaling around SR34.22 billion.
Although the proportion of credit allocated to the scientific and education sectors may currently be modest, the Saudi government recognizes their vital importance in driving the kingdom’s broader transformation agenda.
Recognizing the paramount importance of innovation and promoting a culture of scientific inquiry, the Government has implemented diverse initiatives aimed at promoting these sectors.
These efforts are believed to have played a role in the gradual increase in credit support extended to these sectors by financial institutions. As the Kingdom continues to prioritize knowledge-based industries and endeavours, further progress and investment in these sectors is expected to drive the country towards its ambitious developmental goals.