Sales prices bottomed out in Riyadh during the first quarter of 2016 as values stabilised for the first time since Saudi Arabia introduced mortgage regulations in 2014, according to a new report.
Real estate consultancy JLL said in its Q1 Riyadh Real Estate Market Overview that the Saudi capital witnessed varied performance across its real estate sectors – the residential and hotel market experienced a general slowdown, while the office and retail segments witnessed some marginal growth.
JLL said around 6,000 units entered the residential market during the first quarter of 2016, bringing the total stock of residential units to 995,000.
Data from the Ministry of Justice revealed a decrease of around 6 percent in residential transactions over the quarter, representing the lowest decrease in transactions since the introduction of the mortgage regulations in November 2014.
It added that sale prices for villas and apartments appear to have bottomed out, remaining relatively stable since the last quarter. However, year-on-year sales prices have decreased by 4 percent and 6 percent for apartments and villas respectively.
The report said rental rates for villas and apartments have decreased marginally by around 1 percent across Riyadh.
The Saudi Arabian Monetary Agency (SAMA) has increased the maximum loan-to-value ratio for mortgages from 70 percent to 85 percent for real estate finance companies.
"Although these companies represent a small portion in comparison to local banks, this move should make housing more affordable and therefore strengthen demand. This move should help reenergise the market and help reverse the recent slowdown in sales," JLL said.
Jamil Ghaznawi, country head of JLL Saudi Arabia, said: “It is interesting to note that the varied performance across Riyadh’s real estate segments over the first quarter of 2016.
"In the residential market, rental rates witnessed a slowdown, but sales prices have bottomed out as prices stabilise for the first time since the introduction of the mortgage regulations in 2014."
JLL said vacancy rates in the office sector have remained stable at 16 percent while rental rates have marginally increased across the city.
Historically, Riyadh’s office market was mainly driven by public sector tenants. However, with a continued period of low oil prices, the Saudi government has become more cautious on new expansions, the report added.
Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.