Saudi Arabia’s long-awaited mortgage law could be edging towards reality, according to the consultancy CB Richard Ellis, which could provide a stimulus for the residential property market.

The sector is suffering from shortage of affordable homes.

“Significant housing shortfalls exist in both the middle and lower-income sectors,” said Mike Williams, a director of CBRE in its latest Saudi report.

“The new law, which is thought likely to address the ability of lenders to foreclose on non-performing mortgages, appears now to be inching towards a conclusion.” Saudi Arabia, with its burgeoning population, has become a centre of investor attention in a region that has seen sharp declines in property values over the past 18 months.

House prices in Riyadh fell about 20% in 2009 but Saudi Arabia's real estate sector escaped the major corrections seen in other parts of the Gulf, CBRE said.

The National/