An international real estate report revealed the trends of the real estate market in the Kingdom during the next phase and expressed the role of the real estate sector in Vision 2030, as the reports clarified that the cities of Riyadh and Jeddah are still witnessing a general slowdown in performance, indicating that the stock of housing units in the capital will rise to one million units, while Jeddah will remain the same, and expected property and land prices in Saudi Arabia to decrease over the next two years because of the white land fees.

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Million housing units in Riyadh

The report issued by Jones Lang LaSalle, a leading global real estate investment and advisory firm, focused on the real estate market in Riyadh and Jeddah for the second quarter of this year, during which it evaluated the latest trends in the office, residential units, shopping mall space and hotels sectors. The report analyzed that weakness in the residential real estate market during this quarter, with marginal declines in rental allowances in Riyadh and sales prices in Jeddah, and projects were delayed again in Jeddah, despite efforts to reduce the shortage of affordable housing.

Land and house prices fall

Jones Lang LaSalle Saudi Arabia National Director Jamil Ghaznavi commented on the report's findings by predicting that future projects will pick up, leading to a decline in land and home prices in 2017 and 2018, in line with the introduction of white land fees: "In Riyadh, the office market recorded a marginal decline in rental allowances in Q2 2016 and will see further pressure as new properties enter the market, specifically the King Abdullah Financial Center and the ICT Park project, while in Jeddah, completed projects succeeded in stabilizing office performance rates during the second quarter."

attributed the decline in demand from government entities to the volatile oil prices throughout the quarter, which reduced government spending in general, which negatively impacted the performance of the hotel sector in Riyadh and Jeddah, the occupancy rate in the two cities decreased, and competition intensified following the opening of two new hotels in Jeddah."

Ghaznavi added that the hotel sector in Riyadh has been negatively affected.

Thousands of housing units implemented

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The report added that the Ministry of Housing has embarked on the first project to build 7,000 villas in cooperation with the private sector, which will help provide part of the demand for housing of this type, while demand for shopping centers will remain high, and more than 8,000 hotel rooms are expected to be introduced to the market by the end of 2018, but delays in delivery are expected, given the relatively low realization rate of hotel projects in the past. In Jeddah, the report stated that raising the loan-to-value ratio from 70% to 85% is expected to boost demand for residential sales, especially as selling prices remain low and demand for residential units remains low. According to Ministry of Justice figures, residential sales transactions have declined by approximately 9% year-on-year.