As a result of the wait-and-see attitude prevailing in the real estate market and the general stagnation in sales volume, trends in real estate transactions—both sales and purchases—varied across different Saudi cities, but they all saw a decline in the number of transactions completed during the first quarter of 2016 by 10% compared to the same period in 2015.
The residential real estate market in Riyadh:
With Riyadh’s growing population, real estate professionals and experts expect demand for residential units in Riyadh to continue rising in the mid-to-lower end of the market, and this trend is expected to continue in the future, as Riyadh’s population growth is projected to reach 2% annually over the next two years.
Those interested in real estate in general, and the residential sector in particular, are expressing concerns that the development projects currently under construction and the types of properties being offered on the market may not meet the needs and preferences of many home seekers, which has recently led to increased demand for rental properties in Riyadh and rising prices throughout the city. At the same time, average sales prices remain low due to a slowdown in annual growth rates, which show a year-over-year decline of 10% in the number of residential transactions in Riyadh (first quarter of 2016 compared to the first quarter of 2015).
Average prices remain stable in Jeddah:
During the first quarter of 2016, growing demand for residential real estate was concentrated in downtown Jeddah. In light of projected population growth and a shortage of land, demand is now shifting northward toward Abhur Bay, and the areas surrounding Kingdom Tower and Jeddah Economic City are expected to see growth in residential projects. Similarly, land plots located in South Abhur and adjacent to the airport are currently experiencing significant activity.
As for rental prices in Jeddah, they have risen in light of the shift in demand from purchased properties to rental properties; consequently, average sales prices have remained stable, with the volume of residential transactions in Jeddah recording a decline of 8% (first quarter of 2016 compared to the first quarter of 2015).
Impact of the Economic Slowdown in the Eastern Province:
Both Dammam and Al-Khobar have seen significant population growth over the past two years, which has been met with limited housing supply. Demand is expected to ease, as the decline in oil prices negatively impacts the labor market, which is heavily dominated by expatriates.
Rental prices remained stable throughout the second half of 2015 and into 2016. The slowdown in economic activity and its resulting decline in key economic sectors are expected to lead to a decrease in demand over the medium to long term, putting significant pressure on rents. The sales market is expected to remain robust, particularly for residential properties in southern Al-Khobar.
