Saudi investors are discovering that owning an apartment or villa is much more expensive than they anticipated, with housing prices in Riyadh rising at their quickest rate in five years. According to the most recent Knight Frank data, the average price of an apartment for sale in Riyadh is 20% higher than a year ago, while the average price of a villa is 18.6% higher. And there’s a good likelihood that the price rises will continue.
Residential transactions in Riyadh have dropped by 27% in the last 12 months, indicating that potential homeowners are backing out. “In Saudi Arabia, the government’s programmes to boost homeownership have turbo-charged demand, development activity, and house prices,” said Faisal Durrani, Partner – Head of Middle East Research at Knight Frank, the UK consultancy.
Despite a near 30% drop in volume, the value of these transactions fell only 2% to SR40.4 billion, reflecting the spectacular price increase being seen in all areas of the residential market,’ according to the report.
The increasing demand for homes in Riyadh reflects the growing migration of young Saudis to the city in search of better job possibilities. It also explains why, despite fewer transactions in the last year, housing prices have remained stable. “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,” said Durrani.
A more sedate Jeddah
In instance, in the year leading up to Q1-2021, apartment prices in Jeddah increased by 4.9 percent, while villa prices increased by only 1.2 percent. Residential transactions grew 5% in the prior year, despite moderate price increases, while the overall value of residential sales increased 46%.
“Anecdotal evidence (shows) a return of Saudi nationals and expatriates to Jeddah, slowing the loss of talent to Riyadh,” the Knight Frank report finds. “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.”