According to a new study by Knight Frank, Saudi Arabia has a big untapped market of first- and second-time property buyers, with a number of homeowners and tenants interested in investing in a residential unit.
In an annual survey of 1,003 Saudi citizens by a global property consultant, 44 percent of homeowners plan to buy a second home. More than 80 percent of residents who currently rent in the kingdom plan to buy a home within the next year.
Knight Frank said the findings of the study, conducted among households in Riyadh, Jeddah, and Dammam, indicate the “depth and breadth of demand” for homes in Saudi Arabia.
Second-time buyers
49 percent of those who are looking to buy said they would be motivated by investment considerations, specifically rental yields, while 44 percent said the second property would be used exclusively by the family.
“It is clear there is a vibrant second homes market that is waiting to bloom,” said Faisal Durrani, partner – head of Middle East Research at Knight Frank.
“For the very first time, we have been able to quantify the quantum of demand for second homes in the kingdom. With 44 percent of households keen on acquiring another home, the substantial size of the yet untapped second homes market has been unmasked,” he said.
Budget
Durrani said developers in Saudi Arabia have to be aware of the size of the pool of second-time homebuyers, as well as their budgets. Knight Frank’s survey found that only 29 percent of potential buyers have budgets of more than $800,000.
“Our understanding suggests that most Giga projects are planning the bulk of starting prices at around $1 million, suggesting there may be a risk of an oversupply of luxury homes in the future,” he said.
Riyadh has the lowest second home budgets, with only 22 percent saying they are willing to spend more than $800,000, while more people in Dammam (28 percent) and Jeddah (45 percent) are willing to spend the same amount.
First-time buyers
In addition, Knight Frank’s survey found that there is a strong market for first-time buyers in Saudi Arabia, with 84 percent of tenants saying they would like to buy a home within the next year.
Over half (48%) of the tenants are willing to spend between $200,000 and $800,000, with about a third (31%) wishing to buy a villa. Forty-eight percent are interested in buying an apartment.
Knight Frank, however, noted a discrepancy between market expectations and reality.
In some Saudi cities, property prices have increased since 2019, with Riyadh’s rising by 14.4 percent. In Riyadh, the average price of a good-quality two-bedroom flat is 750,000 riyals ($199,000), while a three- or four-bedroom villa usually sells for more than 2.3 million riyals.