The number of residential transactions in Riyadh and Jeddah rose substantially during the third quarter of 2019, driven by improving consumer sentiment, attractive valuations and the development of several large-scale housing schemes, according to a new report from Knight Frank. Efforts to expand the mortgage market also had a positive impact.
Residential transactions in Riyadh rose 122 per cent year-on-year in the third quarter whereas in Jeddah, transactions rose 82 per cent. The value of transactions also rose in both major cities, with Riyadh recording 12.92 billion Saudi riyals (Dh12.65bn) in transactions during the third quarter, up 139 per cent year-on-year. Transactions in Jeddah were up 60 per cent to 4.27bn riyals, the report said.
“We expect the volume of transactions to maintain a positive momentum over the next 12 months, underpinned by the Sakani affordable housing programme and the regulatory efforts to expand the mortgage market,” Knight Frank said in the report.
Sakani is a government programme aimed at providing affordable homes for Saudis via subsidised land plots and access to cheap home loans.
Residential supply in Riyadh increased to 1.24 million housing units, with 8,000 new units added in the third quarter, Knight Frank said. The consultancy expects 70,000 more units to be handed over to the market between 2019 and 2021.
In Jeddah, residential supply reached 835,000 housing units, with about 1,800 added to the market during the third quarter. About 25,000 units are expected to be handed over between 2019 and 2021 to the Jeddah market.
Villa sale prices in Riyadh recorded a 1.4 per cent year-on-year increase during the third quarter whereas apartment sale prices declined moderately at 0.4 per cent. In Jeddah, villa and apartment sale prices dropped 6 per cent and 7 per cent, respectively, year-on-year.
Price falls in Jeddah are likely to moderate due to the pick-up in activity, which will also cause prices in Riyadh to stabilise, the consultancy said.
Rival consultancy JLL said Riyadh's residential market continued to soften during the third quarter with apartment and villa sale prices dropping 6 per cent and 5 per cent, respectively, year-on-year. Rental rates of apartments and villas also declined at a rate of 1 per cent during the period.
JLL said the Jeddah residential market remained "weak" during the third quarter due to a slowdown in economic activity and softening demand. On an annual basis, average rental rates and sale prices continued to soften by 7 per cent and 8 per cent, respectively, for both apartments and villas.
“The performance of the residential market is expected to witness further declines as more supply is delivered in the coming 12 to 24 months,” JLL said on Jeddah.
“However, we remain positive in our long-term outlook as the market is expected to pick up on the back of housing initiatives, which tackle the shortage of affordability and increase homeownership rates in line with Vision 2030,” it said.
The office market fared slightly better, showing stabilisation, JLL said, after a number of difficult years.
Select Grade A spaces characterised by high-quality finishing with ease of access and ample amenities maintained healthy rents of approximately 1,500 riyals per square metre.
The recent launch of international tourist e-visas in Saudi Arabia, as part of Vision 2030 initiatives to boost tourism, is set to have a positive long term impact on the Kingdom’s real estate market, JLL said.
