Saudi Arabia has seen its residential property market expand rapidly over the last year due to increased demand caused by various government initiatives to boost the housing sector. Property Wire, one of the premier construction news service has published this news recently.
Over the past year, residential prices in Riyadh have risen by 5% to 7% overall, according to the Riyadh residential research report from international real estate firm Knight Frank.
However, it points out that there have been variable performances across the capital’s districts, with congestion issues in the south, for example, responsible for prices stagnating.
Meanwhile, in the north, which has seen notable development activity, prices have seen a healthy uplift of around 9%, the report says.
In the short to medium term, with new supply unlikely to be able to fully offset pent-up demand, the firm expects residential prices to continue to move in an upward direction.
In recent years, Saudi Arabia’s residential construction sector has been expanding rapidly. Indeed, the latest available data from the Saudi Arabian Monetary Agency shows that the value of residential building construction across the kingdom rose for the ninth consecutive year in 2012, increasing by 11.4% year on year.
Riyadh is an important driver of construction activity in Saudi Arabia and the capital city accounted for an average of 27% of all residential and commercial permits issued across the Kingdom between 2003 and 2013.
Moreover, the number of permits issued in the capital rose by 319% over the 10 year period, outperforming Saudi Arabia as a whole, which experienced a 215% increase.
The report points out that despite rising development activity demand for residential units continues to outstrip supply in Riyadh. Indeed, the capital has a requirement for around 50,000 housing units per annum over the next five years and has an estimated housing inventory of just 1.15 million units.
Figures from the Central Department of Statistics and Information (CDSI) show that just 60% of housing units in Saudi Arabia are owner occupied and in Riyadh this drops to 53%. By comparison, the levels of owner occupation in neighbouring countries is much higher at 75% in the United Arab Emirates, 80% in Qatar, 82% in Bahrain and 83% in Oman.
The report explains that in order to address the housing undersupply issue, the government has launched a number of projects in recent years although not all of these have achieved the success that had been envisioned.
For example, in 2011, the government announced a programme of works to build 500,000 homes across the kingdom.’ However, the scheme struggled to gain traction due to issues related to a lack of land availability, complexities in allocating aid and slow moving bureaucratic processes,’ the report points out. Another more recent initiative was the introduction of the mortgage law. If successful, it will provide low and middle-income Saudis trying to get on the first rung of the property ladder easier access to finance, and is projected to push up the kingdom’s homeownership to 80% by 2024.
Information reference : www.propertywire.com