Saudi King Abdullah’s pledge to increase spending on housing by 55 billion riyals ($15 billion) probably will do little to relieve the country’s home shortage unless it’s coupled with long-delayed changes in mortgage financing laws.
“This is largely symbolic,” said Jarmo Kotilaine, chief economist at National Commercial Bank, Saudi Arabia’s largest lender by assets. “We have a significant structural issue that can never be solved through government spending alone.”
Saudi Arabia, the world’s largest oil exporter, needs 2 million homes by 2014 to keep up with the demands of a population that quadrupled over 40 years, Credit Suisse Group AG estimates. A planned mortgage law aimed at bringing private lenders into the market by creating a clearer set of rules is still being debated a decade after it was proposed.
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