JEDDAH, 10 April 2008 — Real estate prices in Riyadh have increased by 40 to 90 percent in recent months, but analysts said property prices in the Kingdom were still the lowest compared to neighboring GCC countries.
The analysts attributed the increase in prices to growing demand for real estate following repatriation of Saudi funds from abroad. Many Saudis favor real estate being a secure investment.
The price for a square-meter of land in the capital ranges between SR400 and SR4,000 while building costs range between SR1,000 and SR2,500 per square meter, Al-Eqtisadiah Arabic daily said. “Many Saudis have shown interest in real estate lately following recurrent fluctuations in the Saudi bourse,” one analyst said.
Suleiman Al-Amri, chairman of a real estate company, said he believed that real estate prices in the Kingdom were much lower compared to neighboring countries. “This indicates that real estate prices in the Kingdom are still normal,” he added.
Al-Amri spoke about growing prospects for investment in real estate in Riyadh as 70 percent of Saudis living in the city still do not own a house. “This situation will increase demand for real estate for building houses,” he added.
He also called for suitable solutions for housing problems in the country. “Rules and regulations should support investment in the sector,” he added.
Al-Amri said prices of real estate in some areas of Riyadh have increased by 90 percent. “This is really frightening.”
He stressed the need for more companies to build housing units. “Many people are still seeking villas and flats instead of purchasing land,” he pointed out.
Abdul Aziz Al-Jaad, a member of the real estate committee at the Riyadh Chamber of Commerce and Industry, also agreed that real estate prices in the city were rising gradually as a result of demand.
“Real estate owners are now selling land to developers rather than individuals,” he said.
Al-Jaad said the tremendous hike in prices would discourage many Saudis from purchasing land. “They will wait until the prices come down,” he added.
Ali Al-Fowzan, director general of a real estate office, said there is big demand for real estate to construct houses, offices and other projects. “The increase in real estate prices could be found all over the Kingdom, not in Riyadh alone,” he said and cited increasing liquidity as one of the major reasons for price hikes. The hike in real estate prices has also reflected in rents for offices in Riyadh and other parts of the country.
Many small businesses have been closed down as a result of a 35 percent increase in rents as their owners thought it was better to close than suffering losses.
Many traders have protested the high increase in rents but Khaled Al-Salman, a real estate developer in Jeddah, defended the move, saying construction cost had gone up 25 percent. He expected more demand for showrooms and office rooms.
Saad Al-Abdullatif, owner of a computer repair shop in Dammam, said he decided to close his present shop when the real estate owner increased rents from SR25,000 to SR32,000. “I am now looking for another showroom at a lesser rent.”
