Mortgage law in Saudi Arabia is likely to change the entire scenario in investment. The long awaited approval will bring a sea change in terms of property prices, bank credit and investment in the sector. The mortgage law has become crucial to stabilise the property and construction sector, which is one of the most important components of the gross domestic product in the world's dominant oil power. The implementation of the law will bridge the widening gap between housing demand and supply caused by relatively low supply and population growth. The pillars of the real estate market in the country in the coming period will be based on growth in domestic demand, correction of prices and the approval of the mortgage law, which will help curtail price rises. A decline in the prices of building materials is expected along with continuation of government construction projects and an acceleration of bank credit to the property sector.
High rents in Saudi Arabia, like in the other Gulf nations, were among the key reasons for soaring inflation in 2008 along with a surge in imported products, food prices and strong domestic demand due to high oil prices. Despite a sharp decline in inflation in the kingdom in 2009 from a record 9.9 per cent in 2008, they remained relatively high due to rising rents. Analysts expect high rents to remain the main reason for inflation this year.
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