In Saudi Arabia, the government‘s programmes to boost home ownership have turbo-charged demand, development activity and house prices
House prices in Riyadh have risen at their fastest pace in at least five-years, with apartments posting a growth of 20%, while villas have seen an 18.6% increase in sales prices, according to research carried out by global real estate consultant, Knight Frank.
Faisal Durrani, Partner – Head of Middle East Research at Knight Frank, explained, “The spectacular house price growth in the Kingdom mirrors what we are seeing around the world. However, in Saudi Arabia, the government’s programmes to boost home ownership have turbo-charged demand, development activity and house prices.”
Riyadh is leading the charge, with apartment prices surging by 20% in the last 12 months, however this significant growth is not without its consequences. Demand is showing signs of being stymied as households find themselves needing to save for longer before being able to transition to home ownership. The resultant impact is a decline in deal numbers, which fell by 27% in the last 12 months.
Knight Frank’s analysis has revealed that transaction volumes across Saudi Arabia fell to 60,000 during Q1. Total deal values have however only receded by 2% to SAR 40.4 billion, reflecting the stellar price growth being experienced in all segments of the residential sector.
With Riyadh’s re-positioning as the Kingdom’s economic heart, the city’s workforce is being bolstered by a significant rise in younger Saudi’s relocating to Riyadh to take advantage of the high concentration of new jobs.
Riyadh’s new and semi-transient additions are however displaying a preference for apartments over villas and are also more focused on renting homes, rather than buying them.
“Despite the receding levels of demand, vendors are either holding firm on prices, or turning to the rental market instead further contributing to the dip in overall deal activity and indeed further exacerbating the shortage of homes available for sale,” Durrani added.
Jeddah
Mirroring Riyadh, house prices in Jeddah have seen rapid growth over the last 12 months, says Knight Frank. Apartment prices increased by 4.9% in the year to Q1 2021, while villa prices rose by just 1.2% over the same period.
The number of residential transactions in the Red Sea coastal city increased by 5% in the last 12 months, while the total value of residential sales increased by 46% over the same period. The greater rise in sales value over volume reflects the substantial growth in house prices in Jeddah.
Knight Frank points to anecdotal evidence of a return of Saudi nationals and expatriates to Jeddah, slowing the loss of talent to Riyadh. Numerous government and private sector entities, like ROSHN, Upton Jeddah, Al Ballad Development, and Jeddah Central, have established their offices in Jeddah, offering multiple employment opportunities for Jeddah’s residents. As a result, Saudi nationals and expatriates are returning to Jeddah, underpinning demand for homes.
Dammam Metropolitan Area (DMA)
Like the rest of Saudi Arabia's major markets, the residential market in the Dammam Metropolitan Area has witnessed a profound price increase. Average apartment prices in the DMA increased by 6.1% in the year to Q1 2022, while average villa prices increased by 2.5% over the same period, according to Knight Frank’s research.
“Anecdotal evidence of increased rates of job creation fuelled by rising oil prices in the Kingdom’s oil producing heartland are underpinning rising demand for homes in the DMA, which is in turn helping to lift home values.”
Still, just like the rest of Saudi Arabia, mounting affordability issues are driving demand away from villas, which has led to a drop in both demand and prices for stand-alone family homes. Apartments on the hand are experiencing a resurgence in demand,” Durrani concluded.
Mirroring Riyadh, the DMA’s residential market experienced a 32% decline in the volume of deals over the last 12 months, while the total value of residential transactions decreased by 18% over the same period. The rising affordability challenge, combined with a lack of suitable supply for mid to lower tier buyers, is contributing to slowing sales activity.
