Saudi stresses on quality as new units come online
Riyadh, March 5, 2013
With thousands of new housing units set to come online in Riyadh and Jeddah over the next few years, the Saudi government is focusing on two key factors - environmental sustainability and the quality of property management, said a report.
Awareness of the benefits of more sustainable construction and operation of real estate remains at a nascent stage in the Saudi market, according to real estate expert Jones Lang LaSalle (JLL).
An indication of the increasing importance now being attached to this issue is the requirement that all buildings in the new King Abdullah Financial District (KAFD) in Riyadh, the largest urban development currently under construction, must achieve LEED certification.
Recent green building codes and other initiatives by Saudi Energy Efficiency Centre (SEEC) and others are also starting to raise awareness, but until developers are either mandated to adopt green standards (through stricter legislation) or the financial benefits of green buildings can be more clearly demonstrated, progress is likely to remain limited, said the property expert in its report.
The residential property market in Riyadh and Jeddah is expected to see a drop in rents as new housing units come online, said the report.
Approximately 6,000 residential units have been completed in Riyadh in the fourth quarter thus bringing the total residential stock in the Saudi capital to just under 910,000 units, according to property expert Jones Lang LaSalle (JLL).
The majority of the recent supply has been delivered in small projects comprising less than 20 units.
The major new announcement in the fourth quarter was Kinan’s residential project Masharef Hills located in the north of Riyadh which is expected to deliver more than 500 units over the coming four years.
An additional 100,000 units are due to enter the market from 2013 to 2015, with annual supply of around 34,000 units, said the report.
According to JLL, Saudi is seeing an increased number of large mixed-use complexes, combining components of office, retail, residential and hospitality use, with several such mega projects now underway in Riyadh, Jeddah and Makkah.
As the Riyadh market becomes more competitive and occupiers have a greater choice of space, two factors that have previously been undervalued in the Saudi market are likely to become more important during 2013: environmental sustainability; and the quality of property management, said the expert in its report.
Awareness of the benefits of more sustainable construction and operation of real estate remains at a nascent stage in the Saudi market. An indication of the increasing importance now being attached to this issue is the requirement that all buildings in the new KAFD project must achieve LEED certification, it added.
The average sale price of apartments has increased in districts to the East, South, and West of Riyadh during the fourth quarter, said the JLL report.
The average asking price for new apartments increased 3 per cent during the period to SR2,810 per sq m (excluding branded apartments).
Average prices will increase further once Al-Argan and Habib Group releases its apartments for sale, it stated.
Al-Reem Residences and Phase 2 of Manazel Al-Qurtaba, currently under construction are expected to deliver around 1,300 apartment units. Once complete these projects will provide quality apartments for end users.
Currently, most apartments available for sale are located in the low income areas of Qurtaba, Yarmouk, in the East and Shifa, Badr, and Suwaidi the South.
The average villa prices have increased across most districts of Riyadh. The average price has increased by 2 per cent in the fourth quarter to SR4,200 per sq m due to significant increases in the West and Central districts.
However, average prices in the Center of Riyadh have remained unchanged in Q4 as most sales have been of older / refurbished projects due to the lack of new products available for sale.
Malaqa, Yasmeen, and Sahfa in the North, Al-Hada and Khuzama in the West and Qurtaba and Ishbiliyah in the East are perceived as the most attractive locations for villas.
JLL pointed out that the new concept of mixing apartments with villas through a separate access was becoming more popular in low end districts to the South and West of Riyadh.
Villas in residential expatriates compounds have shown a larger increase in rents, reflecting the long waiting lists for access to this kind of accommodation.
The availability of new villas for lease is greatest in areas such as Qurtaba and Monisia in the East , Malaqa, Sahfa and Yasmin in the North, said the expert.
The villa occupancy in districts between North ring road and Prince Salman street is increasing rapidly and expected to get more attention from Saudi families when government offices move towards the north of Riyadh, it added.
In Jeddah, approximately 16,000 units were completed in projects, but mostly small ones, said the JLL in its report
This new supply has all been in small projects comprising less than 20-40 units, with no major projects completed.
A further 4,000 additional residential units are expected to be completed during the first half of 2013. Once again the majority of this new supply will be in small projects comprising less than 40 units, it stated.
According to JLL, Kinan Real Estate Development has sold almost 75 per cent of the second phase in its Masharif project off-plan, and is receiving interest in the final stage.
Aayan Real Estate Development will complete its Diyar Jaddah 2 project located in South Obhor in the first quarter of 2013.
Ewan has commenced construction of the second phase of its Al Faridah Residential Project (460 units) as well as commencing the infrastructure work for the third and fourth phases.
A number of major high-rise towers located on the Corniche, are expected to complete during 2013 including Al Jawhara Tower, developed by Damac and the Beach Tower, it added.
With regard to vllas, the rents were down seven per cent in the Northern regions of Jeddah in Q4 2012, which fell to an average of SR108,000 per annum.
According to JLL, the villa rents in residential areas such as South Obhour, North Obhour, Zahrah and Golden Beach remain higher than surrounding neighbourhoods.
Axccording to JLL, the average villa rents also fell in the Western region of Jeddah (by 5 per cent) to reach SR181,000, while rents in the North West increased marginally to average SR76,000.
The villas in residential compounds have shown continuous strong performance in terms of rents and occupancy, due to the preferences of many expatriate families to live in gated communities. The limited availability of such products in the market has also contributed to the growth in rentals, it added.-TradeArabia News Service