Early impact of Covid-19 on private sector employees finance homeownership in Kingdom of Saudi Arabia

Abstract

Purpose For almost two years, the economic shocks and financial uncertainty created by the Covid-19 pandemic have affected all sectors. The private sector employees may be the worst hit. This is because of the lockdown across many countries, including the Kingdom of Saudi Arabia (KSA), leading to income irregularities. Studies exploring private-sector employees concerning housing finance for the houses purchased and how the lockdown has affected their sources of income for repayment plans are scarce. Therefore, this study aims to investigate the possible early negative impacts of Covid-19 on private sector employees’ housing finance homeownership in KSA. Design/methodology/approach A phenomenology type of qualitative research was used. Data were sourced from three cities (Riyadh, Al-Qassim and Medina) and three mortgage banks across KSA. Virtual interviews via Zoom and WhatsApp video calls were conducted with engaged participants (bankers, government agencies and private sector employees). Thematic analysis was adopted, and the analysed data was presented in themes. Findings Findings show that the partial and full lockdown resulted in income irregularities in many private businesses. Also, findings identified downsizing, leading to large-scale unemployment, half-monthly income for employees, loss of profit, human resources wastage, etc. Findings reveal that because of the economic shock, many homeowners have not been able to meet up with their monthly mortgage repayment obligation. Also, the absence of financial support in form of socioeconomic needs has not helped the matter. Research limitations/implications The paper is limited to the early negative impacts of Covid-19 on private sector employees’ housing finance homeownership in KSA and data collected via Zoom and WhatsApp video calls across the three main cities. The recommendations that will emerge from this study may be adopted by other Gulf and Islamic countries with similar homeownership repayment challenges. Practical implications This study would stir key stakeholders, especially the policymakers and mortgage institutions to consider future policy principles that focus on who is at the highest risk for housing-related hardships because of the Covid-19 or future pandemic. The outcome can be used to develop an equitable housing policy framework to foster long-term economic mobility and be validated in the future by scholars. Originality/value Similar research in this area is limited, which makes this study one of the pioneering attempts to investigate the early negative impacts of Covid-19 on private sector employees’ housing finance homeownership in KSA. The paper sheds light on the emerged early negative impacts and proffer feasible possible solutions to promote homeownership amongst Saudi citizens.

Saudi Arabia’s small and medium enterprises (SMES) sector post-Covid-19 recovery: stakeholders’ perception on investment sustainability

“…Between 1 July and 30 August 2021, ten virtual interviews were conducted in three KSA cities (Medina, Riyadh and Alqassim), and saturation was achieved after further exploration with the ten engaged participants. This is in line with Alharbi (2021) that adopted these cities in a similar study that involved Covid-19 and housing finance because they are among the commercial hubs in KSA. The study objectives were achieved via the semi-structured questions and findings thematically presented (Stysko-Kunkowska, 2014; Ebekozien et al , 2021).…”

An appraisal of the early impact of COVID-19 on affordable housing finance in Saudi Arabia's Vision 2030

“…This sub-section focuses on the possible impact of the COVID-19 crisis on affordable housing finance in Vision 2030. The pandemic has changed the pattern of the housing market and the life of intending house owners globally, especially those who are yet to complete their housing finance (mortgage) payments (Alharbi, 2021). In the United States of America, an estimated rate of 44.2 m joblessness erupted as one of the outcomes of general lockdown across the nation (United States Department of Labour, 2020).…”

“…This created an economic recession, by extension, affecting the housing market. Alharbi (2021) opined that a job applicant could not pay back housing loans to the mortgage institution until there is an employment. Ettman et al (2021) reported in early April 2020, 40 states were restricted and 39 states shut down nonessential businesses.…”

“…Raynor and Panza (2021) found job loss, reduction in working hours, reduction in their financial situation, but their mental health had deteriorated, among others as the impact of COVID-19 on housing in Australia. In Saudi Arabia, Alharbi (2021) found that private-driven businesses were majorly affected. To lower the rate of unemployment from 11.6% to 7% To increase medium and small-sized enterprise contribution to GDP from 20 to 35% To increase women's participation in the workforce from 22 to 30% A thriving economy with investing for the long-term To move from our current position as the 19th largest economy in the world into the top 15 To increase the localisation of the oil and gas sectors from 40% to 75% To increase the public investment fund's assets, from SAR 600bn to over SAR 7tn…”

“…To increase household savings from 6% to 10% of total household income To raise the non-profit sector's contribution to GDP from less than 1-5% To rally one million volunteers per year (compared to 11,000 now) Source(s): Alqahtany (2021a, b) recommended that stakeholders, especially policymakers, focus on house owner at the peak risk for housing-related hardship because of the COVID-19 crisis. In the study of Alharbi (2021), from the perspective of private-sector workers finance housing, the author found high record levels of job losses, unemployment enhancing the risk of evictions, financial vulnerability, rising foreclosures and private sector financial instability as the impact of COVID-19 on the employees' homeownership. But the present study is investigating the potential impact of COVID-19 on affordable housing finance focussing on Saudi Arabia's Vision 2030 and proffered measures to mitigate the possible impacts.…”