Dubai: Saudi investors are suddenly finding that owning an apartment or villa is turning out to be a lot costlier than they thought, with Riyadh home prices growing at their fastest in five years. An apartment for sale in Riyadh is 20 per cent higher, while villa price tags are on average 18.6 per cent up from a year ago, according to latest data from Knight Frank. And chances are these price gains will not stop with this.
Potential homeowners seem to be backing out with residential transactions in Riyadh down 27 per cent in these 12 months. “In Saudi Arabia, the government’s programmes to boost home ownership 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 the near 30 per cent dip in volumes, the value of these deals only slipped by 2 per cent to SR40.4 billion, ‘reflecting the stellar price growth being experienced in all segments of the residential sector’.
The surge in home values in Riyadh also reflect demand for housing from the growing migration of young Saudis to the city, chasing better career opportunities. It also explains why despite the fewer transactions in the last 12 months, home prices still hold up. “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 comparison, residential market in Jeddah has seen apartment prices gain 4.9 per cent in the year to Q1-2021, while villa prices rose ‘just 1.2 per cent over the same period’. Given the more modest price gains, residential transactions were up 5 per cent in the last 12 months, while the total value of residential sales increased 46 per cent.
“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.”