Saudi residential market posts solid growth in Q1
Riyadh, June 26, 2013
The residential market witnessed a solid growth across Saudi Arabia in the first quarter as demand for housing rose backed by increased levels of credit, employment, assistance and confidence, said a report.
The residential prices were on the rise in both capital Riyadh and the Kingdom's leisure destination Jeddah, stated Jones Lang LaSalle, the leading real estate investment and advisory firm, in its review of Riyadh and Jeddah real estate markets in Q1.
In Riyadh, the average rents and prices of both apartments and villas witnessed a steady rise as supply continued to trail demand, said the JLL report which highlights the latest trends in the office, residential, retail and hotel sectors of the market in Saudi Arabia’s two largest cities.
The property expert pointed out that the land prices in peripheral areas continue to increase, although "we perceive less speculative pressure than last year."
Commenting on Jeddah market, JLL said villas remained the strongest performing sector, recording increases in both rents and sale prices during the first quarter.
The conditions in the apartment market remained more stable, with no increase in average price or rents being recorded. There have been no major additions to the retail supply in Jeddah, with most new supply in the form of small projects of less than 100 units, the report stated.
On the office sector, JLL said strong demand in the Riyadh office space market continues to absorb most of the space being delivered.
In 2014, the expert expects to see an increase in the availability of vacated second hand space in the CBD as companies implement their planned moves to new projects in the periphery.
The King Abdullah Financial District (KAFD) is poised to complete the first phase of office, residential, and retail space in the third quarter. The marketing centre is now open and formal launch events will be held after Eid al Fitr, said the JLL report commenting on the key projects in Riyadh.
The Arriyadh Development Authority (ADA) has announced the selection of architects and stunning concept designs for stations in the Riyadh Metro. The announcement of the winning consortium(s) to deliver the six-line system is expected imminently, it stated.
In a further boost to Riyadh, the Ministry of Housing has awarded contracts to develop 7,000 affordable housing units at a location northwest of the airport as the government continues to address the nation’s need housing.
The Shoura Council is reported to be considering alternative strategies for encouraging housing development, such as taxes on unused land, it added.
The Jeddah office space market continues to see strong demand from both government and private sector tenants and this has resulted in a reduction in vacancy levels over the quarter from 16 per cent at the end of 2012 to just 12 per cent at the end of Q1, said JLL in its review on the kingdom's leisure city.
Rents have remained relatively stable across the market and are unlikely to increase during the remainder of 2013 given the significant levels of potential new supply, it added.
According to JLL, increased vacancy rates and the greater choice available to tenants will maintain downward pressure on rental levels during 2013, especially for Grade B properties.
On the retail scenario, the report said the trading conditions were good with increasing consumer spending and several new store openings in Riyadh.
"There was just one mall completed in the quarter, the Ethra mall in Sweidi. Rents have been stable across all segments. There is some concern about the retailers’ ability to continue to expand their networks with the stricter regulation of employment of foreigners," it said.
For Jeddah's retail sector, there has been no major change as average rents remained stable, with a marginal increase in super-regional malls being offset by a similar marginal decline in rents for community malls, the report stated.
JLL said it does not expect any significant change in rental levels in Jeddah over the remainder of 2013.
On the hotel sector, JLL said Jeddah remained one of the best performing markets in the Middle East in 2012. The average daily room rates and RevPar in Jeddah hotels both recorded an increase of around 10 per cent in the first quarter over last year.
According to the property expert, the occupancy levels were now stabilising, with Q1 2013 recording the same occupancy level as Q1 2012 (78 per cent).
In Riyadh, the occupancy rates remained unchanged in the first quarter at at 63 per cent over the same period last year. Following a 12 per cent decline in 2012, there has been virtually no change in RevPAR levels ($173), the report added.
Commenting on the reports, John Harris, the co-head of JLL in the Kingdom said: "All across Saudi Arabia, demand for housing is being supported by increased levels of credit, employment, assistance and confidence."
"Demand is also strong across the office, retail and hotel sectors in Riyadh and Jeddah, but with distinct demand drivers and unique risks for developers and investors in each city," he added.-TradeArabia News Service