A recent report issued by Jadwa Investment said on Monday that the overall inflation rate in Saudi Arabia declined by 1.9% in April 2019 compared to April 2018, while the percentage remained the same compared to last March. The report points out that this decrease has been influencing the housing, water and electricity sectors since the beginning of 2019.
The prices of services and goods in the housing, water, electricity and gas sectors declined by 8% from the beginning of 2019 to the end of last April. According to the report, the reasons behind this are the decline in rents of residential units around 9.1% during the same period, and the reforms made by the Ministry of Housing in the real estate sector that make the price of houses affordable for citizens.
“Jadwa” report refers to “Sakani“, the program of Saudi Ministry of Housing that provided about 630 thousand units for citizens since February 2017; the housing units accounted 48% of them. In addition to the announcement of launching 200 thousand housing and funding units during this year, 50 thousand is residential units, 50 thousand residential areas, and 100,000 mortgages. From the beginning of the year until last April, about 55,000 residential options have delivered. There are 145,000 units remain to reach the target of the Ministry for 2019.
“Jadwa” report points out that the decline in the number of foreigners in the Saudi market by 1.6 million people last two years, led to a decline in the rent prices in SA, despite being a subset of the real estate sector. The large role of the lower demand for rented housing consequently lowers prices.
According to the report, residential prices fell by an average of 2.1% compared to the high prices in 2018 due to VAT. The report revises Jadwa’s expectations of inflation rate this year, as a whole to (-1.7%) compared to last year due to adjusting of energy and electricity prices.
The report also points out that the prices of transportation declined by 0.5% in April 2019 due to the policy of Aramco in adjusting the domestic price of gasoline compared to international prices. The report predicts a low growth in seven sectors out of 11 including: health, clothing, and entertainment, and an increase in prices of a number of sectors including food and beverage, restaurants, and hotels by the end of 2019.