2023-07-24-莱坊-Saudi_Arabia_Residential_Market_Review_Summer_2023_8页_5mb

Saudi Arabia Residential Market Summary - Summer 2023

Core Content Overview

This report provides a quarterly analysis of the residential real estate market in Saudi Arabia, focusing on key trends, performance metrics, and affordability challenges across major cities such as Riyadh, Jeddah, and the Dammam Metropolitan Area (DMA).

Key Trends in the Residential Market

• Total Transactions Decline: The first half of 2023 recorded approximately 70,000 residential transactions, a 32% decrease from the same period in 2022.
• Transaction Value Decline: Despite the drop in volume, the total value of transactions fell by 28%, suggesting a rise in unit prices.
• Mortgage Activity:
  • Total number of mortgages issued dropped by 34.9% year-on-year.
  • Total mortgage value decreased by 36.9%.
• Mortgage Rates Impact:
  • Mortgage rates increased from 3% to 5%, reducing purchasing power.
  • Villa mortgages declined by 2%, while apartment-linked mortgages rose by 8%, reflecting a shift in buyer preferences.

Market Performance by City

Riyadh

• House Price Growth:
  • Villa prices increased by 6%.
  • Apartment prices rose by 10%.
• Subdistrict Price Variations:
  • Al Malqa: SAR 8,200 psm for villas, SAR 6,900 psm for apartments (up 14.5%).
  • Tuwaiq: SAR 3,400 psm for villas, SAR 3,300 psm for apartments (up 3.9%).
  • Al Shifa and Dar Al Bayda'a: More affordable, with villa prices ranging from SAR 2,500 to SAR 2,800 psm.
• Supply Trends:
  • Ministry of Housing delivered 23,000 affordable units in H1 2023.
  • Developers are increasing presence with small-scale projects (10–30 units).
  • Upcoming supply includes over 10,000 units across the city, with a focus on apartments and townhouses.
• Demand Shift:
  • Housing demand is expected to focus on smaller homes, apartments, and rental properties as the population approaches 17 million by 2030.

Jeddah

• Price Growth:
  • Villa prices increased by 1%.
  • Apartment prices rose by 2%.
• Subdistrict Price Variations:
  • Al Shatea and Al Murajan: Highest villa prices at SAR 8,200 and SAR 7,000 psm.
  • Al Manar and Al Ajwad: Lower villa prices at SAR 4,100 and SAR 3,600 psm.
• Transaction Decline:
  • Residential transactions dropped by 53% in Q2 2023.
  • Transaction value fell by 52%.
• Affordability Challenges:
  • The income multiplier (years of salary needed to buy a home) is 4.6 for apartments and 14.5 for villas, indicating a significant affordability issue.
  • This is a reduction from the 2016 levels (4.7 and 15.8 respectively).
• Affordable Supply:
  • Ministry of Housing projects dominate the affordable segment.
  • Over 25,000 units are expected to enter the market by 2024, with a focus on Sakani-linked projects.

Dammam Metropolitan Area (DMA)

• Price Performance:
  • Apartment prices increased by 5%.
  • Villa prices decreased by 2%.
• Transaction Decline:
  • Total transactions fell by 44% in H1 2023.
  • Transaction value dropped by 52%.
• Demand Focus:
  • Demand is centered around apartments for ready-built units.
  • Villa transactions were minimal in Q2 2023 due to limited availability and affordability barriers.
• Affordable Supply:
  • Ministry of Housing has added affordable villas to its portfolio, including Al-Bayraq (595 units) and Nisaj Town (1,653 units).
  • Around 12,000 units are expected to be completed by 2024, increasing total stock by 5%.

Affordability Insights

• Income Multiplier Analysis:
  • A 6x salary is generally considered affordable globally.
  • Villas in Riyadh and Jeddah are well above this threshold, making them less accessible.
  • Apartments in Riyadh (SAR 5,100 psm) and Jeddah (SAR 4,200 psm) are more affordable options.
• Market Shift:
  • The affordability crisis is pushing buyers toward apartments.
  • Rental preferences are rising, especially in Riyadh, where 62% of residents prefer renting over owning.

Outlook

• Riyadh:
  • Expected to see sustained demand for smaller homes and apartments.
  • Rental demand is likely to increase due to a transient workforce.
• Jeddah:
  • Affordable supply will be crucial to meet the 70% homeownership target.
  • The income multiplier suggests that villa ownership remains out of reach for many.
• DMA:
  • Continued focus on affordable housing is necessary to meet demand.
  • Apartment development is the key to increasing supply and affordability.

Key Contacts

• Harmen De Jong – Partner, Real Estate Strategy & Consulting
• Mohamad Rabih Itani – Partner, International Project Marketing
• Faisal Durrani – Partner - Head of Middle East Research
• Stephen Flanagan, MRICS – Partner, Head of Valuation & Advisory
• Lars Jung-Larsen – Partner, Luxury Brands
• Amar Hussain – Senior Manager - Saudi Arabia | Qatar | Bahrain
• Talal Raqaban – Partner, Valuation & Advisory, KSA
• Yazeed Hijazi – Associate Partner - Co Head of Stratcon KSA
• Rana Mira – Research Manager - Saudi Arabia

Recent Publications

• The Saudi Report | 2023
• Sustainable Saudi: Exploring the ESG vision
• Saudi Arabia's US$ 1.1 Trillion Vision

Disclaimer

This report is for general information only and should not be relied upon for decision-making. Knight Frank accepts no responsibility or liability for any loss or damage arising from its use. Reproduction of this report is not allowed without prior written approval.

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