Construction plan to stretch over five years and meet 80 per cent of expected demand
Saudi Arabia has committed over SR 100 billion (Dh 99 billion) to construct one million homes for residents in an effort to meet rising demand, according to a five-year plan set for endorsement.
Alriyadh, the Saudi newspaper, published an overview of Saudi Arabia’s ninth plan for development over the course of 2010 to 2014. It is set for cabinet approval sometime this week.
The development plan, projected to include high levels of public funding and investments, is expected to boost the GDP per capita income from the current SR 46,200 up to SR 54,200 in 2014.
A significant portion of the total is set aside for human resources development, such as educational and training amounts of approximately SR 731 billion. That is more than half of the total SR 1,444 billion committed to development.
Alriyadh also noted that the plan looks to construct one million homes to support municipal services which would meet almost 80 per cent of the expected demand over the coming five years. Over SR 100 billion is set to be spent, which is up 64 per cent from the last plan.
This is in response to a request made to the General Housing Authority, who were also asked to create a housing data base.
The latest boom in oil has seen a surge in demand by investors and businesses and a population increase that has made the housing shortage clear in Saudi Arabia, much like other oil producing areas in the Gulf.
This shortage has caused rents to rise, a major part of increasing inflation along with the weakened US dollar and surging prices for other global commodities. The Kingdom’s inflation reached a record high of 9.9 per cent annually in 2008 and then fell almost 50 per cent in 2009.
The banks and other financial firms in Saudi Arabia believe inflation will hold steady in 2010 and 2011, but expect it to remain high due to the shortages in housing.
National Commercial Bank (NCB), the Kingdom’s largest banking institution, says that the nation will need to construct almost 158,000 homes each year for the next decade to keep up to even a 2 per cent population growth.
An NCB study noted that those numbers translate to 1.58 million new homes in total. The investment needed will reach almost SR 79 billion every year.
Although Alriyadh did not state the amount of committed spending in the Kingdom’s ninth plan for development, it is expected to be much more than the eighth plan. The last plan included high expenditures as Saudi experienced positive financial times, enjoying high production and prices in the oil industry.
The plan that stretched from 2005 to 2009 saw spending reach SR 2.2 trillion, which was almost SR 1 trillion over the AR 1.2 trillion in expenditures the previous plan saw.
That increased spending and recorded fiscal surplus reached in the 2005 to 2009 plan were possible due to the growing revenues in the Kingdom, which went from SR 1.3 trillion in the plan that was implemented previously to SR 3.4 trillion, as reported by the nation’s central bank, Saudi Arabian Monetary Agency (Sama).
That revenue increase of almost SR 2.1 trillion throughout the eighth plan was thanks to a marked increase in oil prices and increased output by Saudi Arabia, an area that controls almost one quarter of the planet’s recoverable crude.
Official reported numbers show that Saudi Arabia pumped out 8.7 million barrels on average each day through the eighth plan, as opposed to only 8 million barrels per day in the seventh plan. Prices for crude increased from $26 per barrel in the seventh plan to an average of $64 per barrel in the 2005 to 2009 plan.
When the eighth plan was announced in 2005 Alriyadh noted that it was a major landmark for the Kingdom’s social and economical development. That plan was touted as the first that took a long term view and employed specific targets and goals.Andrew Reid, Staff Writer, Gulf Jobs Market News