Jeddah house prices predicted to rise by year-end

Residential real estate prices in Jeddah will begin to rise by the end of this year as major developments in the city are hit by delays, a new report predicted on Tuesday.

The supply of residential units in Saudi’s second most populous city is increasing faster than demand, particularly at the upper end of the apartment market, according to a report by real estate consultancy Jones Lang LaSalle (JLL).

But a significant oversupply will be averted due to expected construction delays at some of the planned “mega” residential communities, it said.

“As the market absorbs the stock offered for sale in standalone buildings and small scale development, prices could start to rise again towards the end of the year, albeit at a modest rate,” a team of analysts wrote.

Trading in the middle income segment of the market is still buoyant, but buyers are likely to pay more attention to the reputation of the developer and the quality of their management in the future, JLL said.

By contrast, Jeddah’s office market looks set to slow down this year.

“Demand has been moderate so far in 2009 and has failed to keep pace with the steady supply of new office buildings entering the market,” the firm said.

“With rents flat and lenders cautious, we do not expect many more building launches, but it will take the market some time to absorb what has just been delivered.”

The opening of several new retail developments, such as the Al Hokair Group’s Mall of Arabia, the largest one in Jeddah to date, means rents will come down in shopping malls that fail to secure anchor tenants and quality restaurants.

Malls are also competing on non-retail attractions, including traditional souq areas, jewellery markets, ice skating and indoor skiing, JLL said.

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