Saudi residents revealed that demand to buy a home has dropped in 2023 due to the increase in property prices, according to a survey by Knight Frank carried out in partnership with YouGov.
The kingdom’s properties has seen a strong price growth over the last two years, leading up to Vision 2030, the increase of prices is dampening demand for homes.
Last year, the demand for homes in Saudi was at 84 percent, however, it has dropped to 40 percent this year.
“The rapid escalation in house prices has undoubtedly cooled demand to purchase a home. With villa prices in Riyadh rising by 45 percent over the last two years to over SAR5,000 per square metre – the highest level in at least seven years – the dream of home ownership, as well as the desire to own a second home is forcing households into a holding pattern. Indeed, the total number of homes sold in Riyadh fell by 34 percent last year, while in Jeddah there has been a fall of 16 percent,” Faisal Durrani, Partner, Head of Middle East Research at Knight Frank, explained.
“We have been tracking the ratio of house prices to household incomes and with villas in Riyadh and Jeddah standing at 13.3 and 15.1 times annual incomes, affordability thresholds have been exceeded. A globally accepted level of ‘affordability’ is usually six-times annual incomes. Furthermore, the last time affordability ratios in Saudi stood at these levels was in 2016, which also coincides with the last market peak,” he added.
A decline in house prices is not expected but rather a stagnation in values as demand continues to build.
Harmen de Jong, Partner – Head of Real Estate Strategy and Consulting, Saudi Arabia at Knight Frank said, “Domestic migration has been a key driver of housing demand in the kingdom. Our surveys have helped us to estimate that the level of domestic migration could be as high as 47 percent of the total number of Saudis in Riyadh, 42 percent in Dammam and about a third in Jeddah. Clearly not all of these ‘career migrants’ will be keen to buy a home in their adopted cities – in fact 68 percent claim they would move home should the right job arise.
“The critical consideration for the country’s developers will be how to cater to this typically young and footloose generation of Saudis, many of whom are finding themselves priced out of the home ownership market.”
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