The Saudi government has shelved mortgage reforms, leaving new homes vacant and driving up rental rates, according to a study by the property consultancy CB Richard Ellis (CBRE).
Demand for homes in the kingdom is at an all-time high, but new homes sit empty because prospective buyers cannot afford them, analysts say. The lack of action on the mortgage laws was a "major setback", CBRE said.
"Buyers are suffering as much as developers who want to enter the market," said Afshan Dadabai, the manager of Middle East research at CBRE.
Recent reports by other companies corroborate CBRE's conclusions. Between 12 and 15 per cent of new homes in the kingdom are vacant, according to the research company RNCOS.
Colliers International reported in December that more than 28 per cent of the houses built in Riyadh in the previous 18 months were vacant.
"The key issue right now is the pending law," Ms Dadabai said. "There has to be some way for the average Joe who wants to buy a villa to have some access to financing."
The demand for housing exceeds supply by 46 per cent, CBRE said. More than 1 million homes would have to be built by 2014 to satisfy the demand, the company estimates.
The gap is attracting the interest of developers. Property investments in the kingdom were an estimated US$400 billion (Dh1.46 trillion) last year, an increase of 33 per cent from 2009, with "residential real estate accounting for the bulk of investments", CBRE said.
"There is housing coming online, it's just not affordable by the mass population," Ms Dadabai said.
Saudi Arabia's population of young people is increasing, and more couples are leaving their family homes earlier, she said.