MENAFN - Arab News
Affordable housing a GCC priority
(MENAFN - Arab News) A mismatch between supply and demand has caused a crisis in the Gulf Cooperation Council (GCC) housing market spurred by rapid population growth, rising house prices, and increasing urbanization.
Property for renting and buying in most of the main cities is out of financial reach for most of the young middle and lower-income classes. GCC governments have to action now to prevent the problems caused by inadequate housing worsening.
Housing is an economic asset, an investment and a market commodity. It is a means for poverty alleviation. Homeownership usually promotes wealth accumulation, allows the building of wealth through home equity growth, and boosts a better quality of life.
Housing is also a major social issue as well as a basic condition for survival. A good housing policy helps to maintain political stability and a secure social order while preventing problems related to homelessness, poverty and exclusion.
The Housing Problem in GCC Countries
In spite of the oil-based wealth of the region, the supply of housing affordable by those on a low or average income is constrained by lack of finance schemes and scarcity of available land, resulting in a huge unmet demand for housing among lower-income households of both nationals and expatriate workers.
Wealth created by the oil boom has increased young people's aspirations for their living standards, but it has also created obstacles by encouraging high-cost construction. This has put property for buying or renting in most of the main cities of the region out of financial reach for the majority of the young middle- and lower-income classes.
The shortage of affordable housing is one of the social problems underlying the unrest in the Arab region. High youth unemployment rates have made it harder for young people to secure a house.
Housing shortage causes stress for young people who have to spend most of their income on housing. It may also be a cause of marriage delay or even marital breakdown as housing is still linked to traditional family values in the Gulf region where the groom and his family are usually responsible for the expenses of marriage including housing.
The GCC housing crisis has been spurred by rapid population growth, the high cost of land and rising house prices, increasing urbanization and lack of competition. Increased migration of population from rural to urban areas as well as an influx of foreign labor led to the expansion of large cities in the region causing a chronic shortage of housing and a huge increase in price.
Available land is high in cost not only due to its scarcity but also because most landowners leave it unused letting its value increase.
In Bahrain, the housing crisis is acute mainly in Manama where demand is high. More than 55,000 Bahrainis are on the wait-list for low-cost housing. In Kuwait, the waiting time for a government housing grant is several years. Rising housing costs are an obstacle for middle- and low-income Kuwaiti families to homeownership.
In Qatar, the massive influx of foreign labor has led to high population growth and a heavy burden on the residential market. Housing problems have emerged in greater Doha region both for expatriates and nationals with limited income. In Oman, the demand for affordable housing continues to be high.
In Saudi Arabia the housing market, the largest in the GCC region, suffers from high land prices, high sale prices and a shortage of small houses.
Estimates project that the country needs at least 15,000 housing units annually for residential property, but there is a serious mismatch between high prices of houses and lower salaries. Most Saudis live in rented accommodation and it is estimated that only 30 percent of Saudis own their houses.
The cost of building a small house is around 200,000, out of reach of many young Saudis. But as elsewhere, they prefer not to buy apartments for cultural reasons as well as lack of satisfaction in quality of building and high costs of maintenance and repairs.
In the United Arab Emirates (UAE), both Abu Dhabi and Dubai experience a serious housing shortage for lower- and middle-income nationals.
s rents in Dubai are still considered to be lower than in Abu Dhabi, many residents who live in Dubai commute daily to work in Abu Dhabi. Emiratis applying for affordable housing in Abu Dhabi have to wait years and according to data published (April 2011) by the Abu Dhabi Chamber of Commerce and Industry there is a shortfall in supply of 40,000 residential units in Abu Dhabi.
The Need for Affordable Housing
Rapid population growth and demographic changes are a major factor behind the increasing need for affordable housing in the GCC region. The total population of the GCC countries quintupled over the past 40 years, increasing from 7.8 million in 1970 to 46.2 million in 2011, and is projected to reach 65.6 million by 2050. Saudi Arabia, which accounts for over 60 percent of the region's population, scored the highest rise in population - 28 million in 2011, projected to reach 45 million in the next 40 years.
The GCC region has become one the most urbanized areas in the world with over 75 percent of its population living in cities.
During the past decades, GCC countries have experienced exceptional economic and social changes due to the oil boom and its subsequent flow of wealth, creating a fast-changing demography of population growth and large-scale urban development. It has also witnessed an increasing influx of rural and desert dwellers into urban areas as young people migrate to cities looking for jobs.
Urban annual growth rates (2010-15) reached 3 percent in Qatar, 2.52 percent in the UAE, 2.42 percent in Kuwait, 2.38 percent in Saudi Arabia, 2.23 percent in Oman, and 2.21 percent in Bahrain. In 2011, 99 percent of the population in Qatar and 98 percent in Kuwait lived in urban areas. The lowest urban population was in Oman with 73 percent. It is projected that percentages will increase over the next 50 years.
Rapid urbanization has led to the growth of huge cities. In 2011 the population of Riyadh was 5.45 million, Kuwait City 2.4 million, and Dubai nearly 2 million.
The GCC population is still young: The population median age in 2010 was lowest in Oman (25 years) and Saudi Arabia (26 years) and highest in Qatar.
(32 years). This "youth bulge" means that the fastest growing segment of the GCC population is the younger generation from the lower- and middle-income group who are newly entering the labor market and looking for small affordable houses. This is a temporary situation as the population is expected to get older over the next 50 years.
Another reason for urban expansion is the influx of foreign labor, which flooded into the region more than 40 years ago. The private sector still relies heavily on foreign workers and they still account for between 50 percent and 90 percent of the labor force in GCC countries.
A third factor is related to the lack of available land for affordable housing construction. Arable land is scarce due to drought, desertification, and land degradation, and agricultural productivity and rural subsistence are threatened.
Saudi Arabia occupies four-fifths of the Arabian Peninsula but the majority of its lands are desert. Oman, Qatar and the UAE are smaller, built originally on desert lands, and lack habitable agricultural and rural areas. Bahrain is an archipelago of 33 islands with limited rural areas.
According to the World Bank (2009) the percentage of land that is arable is for Bahrain 1.3 percent, Kuwait 0.6 percent, Oman 0.3 percent, Qatar 1 percent, Saudi Arabia 1.5 percent and the UAE 0.8 percent.
Challenges in the Provision of Affordable Housing
Inadequate housing finance constitutes a major challenge for the provision of affordable housing in the GCC region. Housing finance includes plot distribution, land servicing, and the provision of loan and mortgage facilities through the banking system.
Mortgages are difficult to obtain for those on low monthly salaries due to the limitations of a mortgage market that constitutes less than 5 percent of the region's gross domestic product. Other obstacles include the restriction of mortgage information, a dearth of innovative solutions, an inadequate regulatory framework, and business models that are still at an initial stage.
In Saudi Arabia, many housing problems have been connected until a few months ago to the scarcity of mortgage financing and the lack of official legislation to regulate mortgage lending.
The state-funded Real Estate Development Fund gave subsidized medium or long-term loans to Saudi individuals for private or commercial housing projects but did not lend money to buy land. Borrowers have tended to treat extended loans as charity and default on payments is high.
In the UAE, special conditions are provided for those eligible for mortgages and banks are now selective when lending money, favoring people who own their own business.
Social and cultural considerations constitute another critical challenge in the context of affordable housing. The physical aspect and the design of housing are linked to socio-cultural factors, including norms and lifestyles.
Almost all GCC nationals prefer to live in houses rather than apartments. Social requirements such as privacy, social cohesion of family members within the same housing unit, and independence from residential density are all factors young people consider in looking at affordable housing.
Most of the major housing projects built by GCC governments during the past decades were relegated to remote areas where the land was cheaper. They not only lacked important social infrastructural requirements but they also neglected the extended family structure and traditional values of segregation.
Location and public transport systems represent another challenge for affordable housing. Most GCC countries lack a well-developed and effective urban planning system that covers affordable housing projects.
Most projects are usually built outside the boundaries of the city where land is cheaper and they lack an adequate public urban transportation system. The absence of transport disadvantages residents needing to travel to work or school as not everyone has access to private cars.
Another issue is sustainability. Sustainable construction is environmentally responsible and resource-efficient and has to consider location, design, construction, operation, maintenance, renovation, and demolition.
Most GCC affordable housing projects tend to neglect the quality of the environment ignoring factors such as site/energy optimization, water conservation, waste/pollution reduction, and environment degradation.
The integration of smaller units and efficient use of land are important factors for housing sustainability and "green" building is important for reducing the overall impact of the built environment on health and the natural environment, but both these areas have been neglected by GCC construction.
MENA News Headlines
|Mar 7 2014||Cement demand to grow on infrastructure projects in Oman ,MENAFN|
|(MENAFN) Infrastructure projects in Oman is expected to reflect a high growth on the cement sector, according to Oman Observer.
Omani government plans to launch developing transport and social ...|
|Mar 7 2014||Aviation sector to register highest growth in ME ,MENAFN|
|(MENAFN) Traffic in air passenger and air cargo is expected to outperform in the Middle East by 2032 compared to all other regions, according to Oman Observer.
Air passenger traffic in the Middle ...|
|Mar 7 2014||UAE's Danube revenue up 17 percent in H2 ,MENAFN|
|(MENAFN) Sales revenue of Danube Group, a leading construction and home interior company in the UAE, was estimated at USD 544 million in 2013, according to Khaleej Times.
Revenue rose by up to 17 ...|
|Mar 7 2014||UAE, Serbia sign USD1 b loan deal ,MENAFN|
|(MENAFN) UAE's Department of Finance has signed a USD1 billion loan deal with Serbian Finance Minister in a visit to Abu Dhabi, according to Khaleej Times.
The loan deal aims to strengthen ...|
|Mar 6 2014||Cement demand in Oman to grow 6 percent annually ,MENAFN|
|(MENAFN) Cement demand in Sultanate of Oman is expected to grow in the upcoming few years, Times of Oman reported.
Huge infrastructure and tourism projects in the Gulf nation will push cement ...|
|Mar 6 2014||Gulf investors to invest in Moroccan private sector ,MENAFN|
|(MENAFN) A partnership between Saudi Islamic Corporation for the Development of the Private Sector (ICD) and Morocco-based Al Ajial Funds has been signed to invest jointly in Morocco's private ...|
|Mar 6 2014||UAE top importer of Swiss watches in region ,MENAFN|
|(MENAFN) The Federation of the Swiss Watch Industry said that the UAE ranked first as the primary Middle Eastern country in the Top Ten list of importers of Swiss watches, Saudi Gazette ...|
|Mar 6 2014||Bahrain oil, gas, water projects at USD14b ,MENAFN|
|(MENAFN) Bahrain has re-asserted itself as a regional powerhouse in the oil & gas as well as power & water sectors, Saudi Gazette reported.
The country has USD14 billion worth of oil, gas power ...|
|Mar 6 2014||Jacobs wins BP contract in Oman ,MENAFN|
|(MENAFN) Jacobs Engineering has been awarded with contract by BP for process and infrastructure work on the greenfield Khazzan project in Oman, Times of Oman reported.
Vice president of Jacobs ...|
|Mar 6 2014||Al Futtaim Carillion wins USD250m contract in Dubai ,MENAFN|
|(MENAFN) Al Futtaim Carillion announced that it has won a contract by Meraas in the UAE, Arabian Business reported.
The USD250.66 million contract is for the construction of the Avenue Phase 2 ...|
|Mar 6 2014||Hilton plans Qatar expansion ,MENAFN|
|(MENAFN) Hilton Worldwide is planning to expand in Qatar with the signing of a management agreement with First Qatar Real Estate Development Company, The Peninsula Qatar.
The management agreement ...|
|Mar 6 2014||Saudi MERS death toll rises to 62 ,AFP|
(MENAFN - AFP) Saudi health authorities said Thursday a man has died from the MERS coronavirus, bringing the death toll from the respiratory disease in the worst-hit country to 62.
The 55-year-old ...|
|Mar 6 2014||Olsen writes off England's World Cup chances ,Kora|
|(MENAFN - Kora) Daniel Sturridge scored the only goal of the game with a header eight minutes from time after England had looked set to fail to win at Wembley for a third consecutive game - following ...|
|Mar 6 2014||Sabella blames tiredness for dour showing ,Kora|
|(MENAFN - Kora) Sabella's team were nowhere near their best in Bucharest on Wednesday, with captain Lionel Messi particularly underwhelming as he appeared to struggle with illness.
|Mar 6 2014||'Happy' Keane to stay with Galaxy ,Kora|
|(MENAFN - Kora) The Ireland international, 33, has made 55 league appearances for the Galaxy, scoring 31 goals and helping them to two MLS Cup titles, while also bagging the club's MVP award last ...|
|Mar 6 2014||Del Bosque predicts bright future for Costa ,Kora|
|(MENAFN - Kora) Costa, who represented Brazil in two friendlies before pledging his international loyalty to Spain, where he plays for Atletico Madrid, started against Italy on Wednesday as his new ...|
|Mar 6 2014||International Friendly: Mexico 0 Nigeria 0 ,Kora|
|(MENAFN - Kora)
It was a chance-filled affair at the Georgia Dome, with all three participating goalkeepers - Guillermo Ochoa (Mexico), Vincent Enyeama and Austin Ejide (Nigeria) - all producing ...|
|Mar 6 2014||Flyers soar over Washington in NHL ,Kora|
|(MENAFN - Kora) The Flyers and Capitals are among the backlog of teams vying for play-off spots in Metropolitan, with the Flyers sitting second on 72 points, just five clear of the sixth-placed New ...|
|Mar 6 2014||NATO Steps Up Cooperation with Ukraine ,Qatar News Agency|
|(MENAFN - Qatar News Agency) NATO is stepping up its cooperation with Ukraine while reviewing cooperation with Russia, the NATO Secretary-General Anders Fogh Rasmussen said.
Speaking after talks ...|
|Mar 6 2014||Libya: Niger Extradites Gaddafi's Son Saadi ,Qatar News Agency|
|(MENAFN - Qatar News Agency) The Libyan government announced today that former leader Muammar Gaddafi's son, Saadi, has been extradited from Niger and is now in custody in Tripoli.
Saadi Gaddafi ...|