Villa prices in some areas of Saudi Arabia have surged by as much as 40 percent in the second half of this year, fuelled by inflation and anticipation over the expected introduction of the mortgage law, according to a new survey.
Banque Saudi Fransi’s second-half Saudi real estate survey showed that the average prices for small villas in one area of north Riyadh rose by 40.6 percent.
The median asking sale price for small villas in Riyadh rose by 19 percent overall.
In Jeddah, the same figure saw a 17 percent rise. Again, however, demand for small villas in north Jeddah – by far the most expensive area covered by the survey – pushed prices up by over 20 percent from a year ago.
Villas in north Jeddah are almost 170 percent more expensive than similar sized properties in the southern part of the city, BSF noted.
By comparison, advertised rates for large villas in both cities remained more stagnant.
Countrywide, BSF said that the median asking price for small villas had increased by 3.2 percent.
Apartment prices also rose across the board, with the biggest increases noted in upscale districts in Jeddah and Riyadh. Overall, the median price of a large apartment rose by 4.7 percent during the period, still slightly below the highs of 2008.
The value of small apartments increased by eight percent, surpassing 2008 figures.
Elsewhere, prices also increased in the Eastern Province, but not to the same extent as Riyadh or Jeddah. In Khobar, the most expensive city in the area, prices rose by 3.3 percent for a large apartment and 4.2 percent for a smaller apartment.
BSF said that the data showed that more and more Saudis favoured large apartments and smaller villas. A shortage in supply of villas has enabled real estate agencies to increase prices, despite the fact that Saudis’ purchasing power remains moderate.
The bank also said that the relatively youthful Saudi population – with 59 percent under the age of 30 – would lead to continued demand for villas and apartments.
However, BSF also said that the long-awaited mortgage law would not revolutionise the property sector immediately, and warned that banks were likely to take a measured approach to home financing once the law was passed.
“While it is hoped the law’s passage will allow much wider access to property ownership, this reality could take time,” the report stated.
“At least in the medium term, the law is not poised to benefit the majority of Saudis whose monthly income stands below SR8,000. Paying SR464,167 for a large apartment and SR1.06 million for a small villa – the median country-wide prices in H2 – is simply out of reach for most young people.”
BSF’s survey was drawn from 37 real estate and rental firms from across Saudi Arabia.