Economic and media reports have revealed that the size of the Kingdom’s real estate market in 2018 was approximately 1.5 trillion riyals. New real estate construction accounts for a significant portion of this market, alongside the construction, sale, purchase, and leasing of properties in the local market, while the rental market serves as the driving force and mainstay of the sector. Official estimates indicate that there are approximately 6.5 million residential units in the Kingdom, of which 900,000 are vacant; Saudis reside in about 3.5 million residential units, while residents occupy approximately 2.0 million units.
2.1 million residential units owned by Saudis
Estimates indicate that the rate of real estate ownership among Saudis reaches 60 %, meaning that Saudis own approximately 2.1 million housing units, compared to about 1.4 million units rented to Saudis and about 2.0 million units rented to residents. This means that the total number of rental units in the Saudi market is approximately 3.4 million, and there are about 900,000 residential units that are ready, vacant, and available for immediate rent.
According to preliminary estimates, if the average annual rent for apartments and villas ranges from 20,000 to 30,000 riyals, the total value of the Kingdom’s residential rental market ranges from 68 to 102 billion riyals annually, Therefore, we can say that the rental market represents the heart of the Kingdom’s real estate market and serves as the compass for real estate investment and financing in one way or another.
However, all these transactions are marred by a lack of regulation, as they are left to customary or arbitrary arrangements between landlords and tenants. This is why the Ejar Network was established—to standardize these transactions and place them within a regulated and documented framework.
Ejar Network: Correcting Conditions in the Rental Sector
The new Ejar Network represents a qualitative leap forward from haphazard paper contracts that are drafted in various ways—contracts that may shortchange one of the parties and may not be accepted by the courts in their current form. With the Ejar Network, however, there is a standardized electronic format that is legally and objectively acceptable and safeguards the rights of all parties through uniform wording.
The old, traditional contract followed payment terms imposed by the landlord—or perhaps by the tenant themselves under certain circumstances—often involving annual or semi-annual payments, which frequently led to delays and disputes, which could be difficult to resolve. Now, payment terms vary to suit the circumstances of both parties. In fact, the new system goes a step further by offering a unique program to support tenants who are unable to pay their rent and against whom a court order has been issued. Once their inability to pay is confirmed, the Ministry will pay the amount due in full or in part, depending on each individual case.
Three Sectors in the Rental Market
There are three sectors in the rental market in major cities: office space, residential units, and retail outlets. According to data from the first quarter of 2018, the total office space in Riyadh reached 4.0 million square meters, and the average rent per square meter was 1,298 riyals. Vacancy estimates for this quarter reached 9 %.
The real estate rental market is expected to pick up, particularly for currently vacant properties, but this depends entirely on new and additional demand, since hardly every Saudi or resident actually lives in a residential unit, and there is no new demand except from newly married Saudis who have separated from their original families or new expatriate residents in the Kingdom seeking housing. As for current demand, it will not have a significant impact, as it is considered a shift from one unit to another.
Riyadh – Jeddah – Al-Khobar
The total value of managed rentals in Riyadh has reached approximately 4.7 billion riyals, As for residential units in Riyadh, the current supply stands at 1.26 million units. Based on the percentage of units owned by Saudis, the number of rented units in Riyadh amounts to 491,000, and thus the value of the residential rental market ranges between 10 and 15 billion riyals. As for leasable commercial space in Riyadh, it has reached 2.11 million square meters, the majority of which is leased.
As for residential units in Jeddah, the current supply stands at 872,000 residential units. Consequently, the number of rented units is expected to exceed 340,000 residential units, with a value ranging from 7 to 10 billion riyals.
As for residential units in Dammam and Al-Khobar, the current supply stands at 360,000 residential units... Consequently, the number of rented units is expected to exceed 140,000, with a total value ranging from 3 to 4 billion riyals.
