Jadwa Investment: The rise in the volume of mortgage loans and low inflation enhances the improvement of the Saudi economy.
May report of Jadwa Investment company revealed that the Saudi economy significantly improved by the end of last March, driven by several financial indicators that led to the economic improvement in Saudi Arabia, most notably of which is the increase in the volume of financing for housing loans, as mortgage loans provided by banks and finance companies increased by about SAR15bn in the first quarter of 2019, an increase of 133% (year-on-year).
Thus, the share of mortgage finance in total loans to the private sector increased to 18.6% in 2018, up from 16.9% in 2017; after bank loans to the private sector increased by 3.1% on a year-on-year basis in March, following a similar increase in February.
The report also referred to the Saudi market of real estate, mentioning that real estate prices fell by 5% during the first quarter of 2019 on a year-on-year basis following a similar decline of 5% in the previous quarter, and the residential property fell by 5.8% while the commercial real estate prices dropped by 3% during the first quarter of the year 2019. Riyadh saw the highest rate of decline compared to the other Saudi regions in the first quarter 2019, the report said.
In February, Jadwa Investment Company predicted that the Saudi real estate sector would grow by 2.7% after real estate activities in Saudi Arabia recorded a remarkable growth of 2.2% in 2018. The sector accounted for 9.4% of non-oil GDP in Saudi Arabia, due to the various housing options offered by the Housing program (Sakani) of the Ministry of Housing, which aims to monthly provide a number of housing options for various citizens, totaling 313 thousand housing units in 2018. The program has also provided about 583 thousand housing units since the launch of the program in 2017.
According to Jadwa report, the Ministry of Housing will continue this year to accelerate the delivery of units to reach the target of housing ownership by 60% by 2020, according to data released by the Ministry earlier this year, 2019, on a list of 200 thousand beneficiaries entitled to residential products in the Sakani program.
The report points out other economic indicators that have led to an improvement in the Saudi economy; point of sale transactions increased by 19% compared to last year while money supply increased by 1.8% and bank deposits increased by 1.7% due to an increase of 2.2% in demand deposits, according to Jadwa.
- A notable Fall in Inflation
In addition, overall inflation fell by 2.1% on a year-on-year basis in March, on the back of lower prices in the first quarter of 2019. The report forecasts that this year will see an inflation rate for the year as a whole at -1.7% on a year-on-year basis.
Among the recovery indicators of the Saudi economy is the rise in prices of crude oil; Brent crude and Texas late in April, and the rise of the Saudi stock market by 5% on a monthly basis in April, continuing its upward performance since the beginning of the year.
For the real economy, the report stressed that the Saudi economy posted a slight improvement in March, with point-of-sale transactions up by 19% on a year-on-year basis, while cash withdrawals continued to decline for the second month in a row, down by 2% and non-oil PMI recorded a slight improvement in March.