RIYADH: As residential prices continue to rise in Saudi Arabia’s cities, the total transaction value of houses in the Kingdom has increased by 6 percent compared to this time last year, the latest report from global property consultancy firm Knight Frank showed.
The average apartment value has spiked as high as 30 percent in Riyadh over the last 12 months, with some of the well-located suburbs in northern parts of the city seeing rises over 40 percent, as the shortage in housing supply continues to play havoc on prices.
This resulted in the number of housing deals slipping, with the volume of home sales this year falling by 24 percent, according to Knight Frank.
“The affordability gulf between buyer expectations and the significant house price increases registered in cities across the Kingdom is underpinning the slowing in the number of home sales,” said Faisal Durrani, partner – head of Middle East Research at Knight Frank.
Despite a strong pipeline of around 200,000 new homes for the capital by 2030, he said price growth remains on a sharp upward trajectory.
As a result, the total volume of homes sold in the capital dipped by 30 percent in the year to the third quarter of 2022 attaining 7, 7750 transactions in comparison to the last year’s transactions of 11,074.
According to Knight Frank’s estimates, Riyadh is expected to face a housing supply deficit when factoring in the expected spike in population to 17 million by 2030, from 7.5 million today.
“To exacerbate matters, anecdotal evidence suggests some sellers are opting to lease their inventory to take advantage of the influx of domestic and international migrants being drawn to the city for work, which is further eroding the sales supply,” explained Durrani.
As business activity is rising in Riyadh, more people flock to the city for employment, driving demand for office spaces and houses while supply still catches up.
The employment level in Riyadh is projected to increase by around 5 percent by the end of 2022, with a further rise of 3 percent in 2023, according to Oxford Economics.
The residential sector in the other major city Jeddah witnessed similar trends as average apartment and villa prices grew at 6 percent and 3 percent respectively during the third quarter of 2022, according to Knight Frank.
The number of home sales too in Jeddah saw a decline of 19 percent, falling to 3,711 deals, in the year to the third quarter.
Despite this, Knight Frank noted that the value of transactions increased by 30 percent during the same period.