JLL report says market is expected to see completion of a further 39,000 units by end-2019
The supply of homes for rent serving senior executives, expatriates and short-term visitors continues to grow in Riyadh, while the issue of affordability for mainstream residential units remains, according to consultants JLL.
Its latest report on the Saudi real estate market said nearly 19,500, mostly stand-alone units, were completed in the Saudi capital city in 2017.
This brings the total residential stock to 1.2 million units, JLL said, adding that the market is expected to witness the completion of a further 20,000 units in 2018 and 19,000 units 2019 respectively.
The Ministry of Housing distributed nearly 55,200 units in Riyadh to facilitate home ownership in 2017. This assistance consisted of 23,600 completed and off-plan residential units, 6,600 developed residential land plots, and 25,000 subsidized housing loans.
JLL's report said: "This is a positive move towards improving home ownership rates in Riyadh, as the private market remains more focused upon high-end developments."
The number of Riyadh apartments transacted in 2017 increased by 12 percent compared to 2016, while prices decreased by 4 percent over the year. The number of villas transacted decreased nearly 16 percent in 2017, while prices declined by 5 percent.
JLL said villa and apartment rents remained unchanged in Q4 but decreased by 5 percent annually.
It added that further declines in rents can be expected following the introduction of the levy on expatriate dependents in mid-2017.
"This resulted in some expatriates repatriating family members, and relocating to smaller units and bachelor studios. Resulting in a general shift in the market from larger, family units (3 bedrooms), to smaller units. Demand will likely continue to weaken as the levy progressively increases over the next three years," noted the report.
JLL also said that in Jeddah, residential supply increased by around 10,000 units to 813,000 units in 2017.
Residential sale prices and rents declined across the Jeddah market but JLL noted signs of stabilisation have begun to emerge, with the rate of decline slowing towards the end of the year.
While apartment rents remained relatively stable across Jeddah in Q4, they showed a 2.7 percent quarterly dip in areas synonymous with expatriates.
"The tax levy on expatriates could be restricting demand for rentals, as expatriates repatriate family members to avoid the levy," JLL added.
Apartment rents fell by 10.9 percent during 2017 while villa rents dropped by just 2.4 percent year-on-year.