Riyadh: The residential sector in Saudi Arabia has experienced a decline in transactions during the first-half of 2023, with a 32 per cent decrease compared to the same time last year. Real estate consultancy Knight Frank’s Saudi Residential Market Review revealed that approximately 70,000 transactions were recorded between January and June this year, a drop from 103,000 in H1-2022.
Moreover, the total value of transactions experienced a slower decline of 28 per cent during the same period, indicating a continued rise in unit prices across Saudi Arabia. Faisal Durrani, Partner, Head of Middle East Research at Knight Frank, said, “Rampant house price growth, coupled with a supply crunch and rising base rates, against a backdrop of an apparent gold rush to get on the housing ladder has driven home values well out of reach of average Saudi households.”
The declining trend in the number of mortgages issued also reflects the market’s challenges, with a 34.9 per cent decrease compared to the previous year and a decline of 36.9 per cent in the total value of mortgages issued.
“With average monthly incomes nationwide standing at approximately SR11,000 (Dh10,771) and at about SR17,500 (Dh17,135) in Riyadh, it is no surprise that household income multipliers in Riyadh have climbed to 4.3 and 12.7 for apartments and villas, respectively. In Jeddah, a household needs to save its income for 14.5 years to purchase a villa,” explained Durrani.
Knight Frank forecasts a stabilisation in prices as demand continues to rise. Durrani explained: “About 62 per cent of households are willing to spend up to SR1.5 million on a home, roughly 50 per cent of current prevailing villa prices. However, the cost of ownership has dampened demand, with just 40 per cent of households keen to transact this year – down from 84 per cent in 2022.”