2023-05-22-莱坊-Saudi_Arabia_Residential_Market_Review_Autumn_2022_7页_17mb

Saudi Arabia Residential Market Review - Autumn 2022 Summary

Core Content Overview

The Saudi residential real estate market experienced a mixed performance in the year to Q3 2022, marked by a decline in transaction volume but an increase in transaction value. This reflects the ongoing affordability challenges and the rising demand for housing, particularly in urban centers like Riyadh and Jeddah. The market is also witnessing a shift in demand dynamics, with apartments becoming increasingly popular due to their affordability, cultural acceptance, and alignment with changing household structures.

Key Market Trends

• Transaction Volume Decline: Total residential transactions fell by 24% year-on-year to around 142,000 in Q3 2022, compared to 186,000 in the same period last year.
• Transaction Value Increase: Despite the drop in volume, the total value of transactions rose by 6%, driven by significant price increases.
• Price Growth:
  • Apartment prices in Riyadh increased by 30% year-on-year, the highest growth rate in at least 5 years.
  • Villa prices also rose, with 20% in Riyadh and 3% in Jeddah.
• Affordability Challenges: Rising house prices, especially in Riyadh, have made home ownership less accessible for many, pushing the dream of home ownership out of reach for some.
• Mortgage Trends:
  • Mortgage volume decreased by 45% for villas and 12% for apartments in the year to August 2022.
  • The long-term fixed rate (LTFR) mortgage was extended from 10–25 years to 30 years to support first-time homeowners, especially given the high demand from this group (84% of first-time buyers aim to transition to home ownership in 2022).
• Demand Shift:
  • The average Saudi household size is declining, with young nationals more mobile, leading to a reduced interest in multi-generational living.
  • This trend is creating a new source of demand for smaller, more affordable housing units like apartments.
• Branded Residences:
  • Luxury apartments and branded residences are in high demand, especially among high-net-worth individuals (HNWIs) and second home buyers.
  • Developers are partnering with international hoteliers like Four Seasons and Raffles to incorporate private residences into their developments.
• Urban Regeneration:
  • In Jeddah, redevelopment and urban regeneration are shifting populations from southern to northern and north-eastern districts, increasing demand for apartments and rental properties.
  • Developers are focusing on community apartment living, with projects like Jeddah Central at the forefront.

Regional Market Highlights

Riyadh

• Price Growth: Apartment prices surged by 30% (highest in 5 years), while villa prices rose by 20%.
• Employment Trends: Employment in Riyadh is expected to increase by 5% by end of 2022 and 3% in 2023, driving demand.
• Supply and Demand: Despite a large pipeline of Ministry of Housing projects, house price growth remains strong. A population deficit is expected by 2030, with the population projected to reach 17 million.
• Mortgage Trends: The number of mortgages linked to apartment purchases increased by 12%, while villa mortgages declined by 45%.

Jeddah

• Price Growth: Apartment prices rose by 6%, villa prices by 3%.
• Transaction Volume: A 19% decline in total transactions, but a 30% increase in value.
• Development Focus: Developers are shifting towards apartments, with projects like Darco building complexes in Al-Zahra, Al-Sawari, and Al-Rawdah.
• Expected Supply: Over 30,000 units are expected to be completed by 2024, including Sakani-linked projects such as Bouvardia City and Jawhra Residence.

Dammam Metropolitan Area (DMA)

• Price Growth: Apartment prices rose by 12%, villa prices by 6%.
• Transaction Growth: Both volume and value of transactions increased by 12% and 59%, respectively, indicating strong market activity.
• Supply Availability: The availability of suitable supply is sustaining deal activity, even with price increases.
• Project Progress: Projects like Bayraq Villas in Al-Wajha Suburb are contributing to the market, with 431 units completed out of 959 expected.

Key Figures

• 124,000 new mortgages worth SAR 97bn issued in the year to Q3 2022.
• 113,000 Saudi families benefited from the Sakani Program (Jan–Sep 2022).
• 37,700 residential sales recorded in Q2 2022, down 16% on Q2 2021.
• 33,000 units expected to be completed in Jeddah by 2024.
• 18,000 units expected to be completed in DMA by 2024.

Conclusion

The Saudi residential market is evolving under the influence of rising prices, changing lifestyles, and government initiatives aimed at increasing homeownership. While transaction volumes have declined, the market remains active due to the strong price growth and the increasing popularity of apartments. The Ministry of Housing and the introduction of longer mortgage terms are key strategies to support affordability and meet the growing demand from first-time buyers. Urban regeneration and the rise of branded residences are further shaping the market, particularly in Jeddah and DMA, where supply is expected to grow significantly in the coming years.