Property prices in parts of Riyadh and Jeddah have risen in the past year as Saudi Arabia's growing population drives demand for new homes, research by the Oxford Business Group (OBG) shows.
Growing Saudi demand for housing pushes prices up
Property prices in parts of Riyadh and Jeddah have risen in the past year as Saudi Arabia's growing population drives demand for new homes, research by the Oxford Business Group (OBG) shows. The recovery in the kingdom's property sector comes after prices fell by as much as 20 per cent last year, separate data from CB Richard Ellis released in April showed.
Prices rose by about 3 per cent in prime and emerging residential areas of Jeddah and Riyadh over the past 12 months, the OBG research found, with demand for new homes expected to reach an estimated 1.5 million by 2015. "Figures indicate that both cities are earmarked for tremendous growth, especially in prime residential districts and new growth areas in the north of Riyadh and Jeddah," said Rakesh Kunhiraman, the Dubai-based director of OBG's consulting division.
Mr Kunhiraman said the construction of low-cost housing, a segment that had been under-served in the kingdom, would also become more important as demand swelled. Saudi Arabia's mortgage law, which has been in the works for almost a decade, is also expected to release pent-up demand once it is implemented, raising speculation over whether there will be enough supply. "Most new developments are targeting the high-income segments of the population, which constitute a relatively small share of existing demand," said Mr Kunhiraman. "This points to a severe shortfall in supply in the low to mid-income segment."
Construction activity in Saudi Arabia is starting to pick up again after US$52 billion (Dh190.97bn) worth of projects were delayed or cancelled last year as the economic downturn took hold and banks curtailed lending, according to a report by the kingdom's National Commercial Bank (NCB) last month. Construction expenditure is expected to grow to $50bn this year from $43bn last year, the report said, as developers eased the housing shortage.
Saudi Arabia's population has more than doubled since 1986 to about 25.5 million according to IMF data and is expected to reach 30 million by 2020. A number of large-scale projects are planned to help meet housing demand, including a 13 billion riyal (Dh12.73bn) urban regeneration project in the centre of Riyadh. The project is being developed by a consortium led by the Arriyadh Development Company.
Meanwhile, fresh bids for the construction of the 1.1km-tall Kingdom Tower in Jeddah, which would be the tallest tower in the world, were expected to be submitted by the end of this month. The building is designed to form part of Kingdom City, a development with an estimated construction cost of $26.6bn. @Email:firstname.lastname@example.org