“We  expect low-cost housing, such as multistory apartments, to gain prominence during the coming years as the Kingdom’s rapidly growing population stretches demand to an estimated 1.5 million new units by 2015,” said Rakesh Kunhiraman, Dubai-based director of OBG’s consulting division.

The study said real estate prices are on the rise in parts of Riyadh and Jeddah, Al-Eqtisadiah newspaper said quoting Kunhiraman.

He added that the growth witnessed in prime and emerging localities of the cities marked a turnaround for the Kingdom’s two key real estate markets — Riyadh and Jeddah. The economic downturn had pushed down prices, while Jeddah also had to contend with further fallout from the devastation caused by the Nov. 25 flash floods.

“Figures indicate that both cities are earmarked for tremendous growth, especially in prime residential districts and new growth areas in the north of Riyadh and Jeddah,” he said.

Al-Masiaf, Al-Muruj, Al-Mursalat and Al-Ghadir districts situated north of Riyadh’s central business neighborhood were generating interest among buyers, while the localities to the north of Jeddah, including the corridor close to the Corniche, were earmarked for growth, the study said.

“Riyadh’s development has shifted toward the northern districts due to high land prices coupled with limited availability in the core business areas of the city,” he said.

“The market is now showing gradual signs of recovery, particularly in prime residential districts which have witnessed a rise of 3 percent in sale prices during the past 12 months,” he said.

Kunhiraman said prices in Jeddah’s sought-after Corniche area were steady following the construction of a number of high-rise apartments in the area.

While some localities in the south and east of Jeddah have experienced a slight fall in prices, Kunhiraman said he still expected these areas, which are dominated by low- and middle-income residents, to influence growth in the sector.

Much of the housing problem is rooted in the country’s fast-changing demography. Fueled by a big rise in the number of foreign workers, the country’s population grew almost 20 percent to 27.14 million between 2004 and 2010, according to a recent census.

The number of houses simply can’t keep up. In total, the country has a deficit of two million housing units, a figure that’s rising by some 150,000 a year, according to economist Saud Jleadan.

Industry experts estimate that just 30 percent of Saudis now own their home. That’s down from more than half 20 years ago according to some estimates.