Demand for housing in Saudi Arabia is pushing the price of property up by as much as 60 percent in the first half, as the kingdom fights bring more supply online, recent data shows.
According to Banque Saudi Fransi (BSF)’s first-half real estate review, the average asking price of smaller villas in some areas of north Riyadh jumped by 59.4 percent in comparison to the same time last year.
The Saudi capital, which houses a quarter of the kingdom’s population, saw small villa values throughout the city rise by an average of 11.5 percent since the second half of last year. Apartment prices also rose in Riyadh, but by far less.
Correspondingly, rents for small villas in the Saudi capital rose by 32 percent year-on-year, in comparison to the country median price increase of 15 percent.
In Jeddah – which has some of the most expensive real estate in the country – smaller villas in the centre of the city saw gains of 21.5 percent year-on-year, while the city average was a six percent gain since the last half.
Jeddah villa rents rose by 10.9 percent since the second half of 2011, while the more expensive northern part of the city saw lease values for small villas gain by 14.5 percent year-on-year.
Housing is a key plank of King Abdullah’s recent $130bn social spending package. Earlier this year, the king called for 500,000 new units to be added to the market over an unspecified period, on top of already-announced plans to add 1.65m homes over the next five years.
In addition, the Shoura Council has now approved long-awaited mortgage legislation, meaning that the Saudi population will have access to home-financing options when the king signs the law into force.
However, most villas – the property of choice for family-oriented Saudis – remain too expensive for the kingdom’s young population.
“While property prices are poised to continue climbing in the short-to-medium term, the prospect of an onslaught of new units being added to the market is likely to lead many Saudis to put off plans to buy properties for a year or two in anticipation that prices would stabilise or fall,” the BSF report stated.
“Evidence of this is already apparent in rents, which witnessed some sharp gains, particularly in neighbourhoods where villa sale prices have soared in the past year.”
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