Saudi Arabia’s GDP stood at 4.8 per cent below its pre-pandemic level during the fourth quarter. However, its 2021 GDP growth forecast of 3.4% is the strongest in the region, showing that the fundamentals underpinning its real estate market remain steadfast for the long-term, according to leading property consultancy Knight Frank.
While Covid-19 has certainly curtailed the real estate activity in the market, and market performance has, in most parts, remained resilient, stated Knight Frank in its real estate market review Q4 2020 release today.
On the residential market, the property expert said the recent decision to exempt real estate transactions from 15% VAT and the introduction of a lower property tax has helped to boost activity in the sector.
Across the kingdom, the market presented a mixed review with capital Riyadh and Dammam recording
fragmented performances in the year to Q4 2020.
The Saudi capital’s residential market registered fragmented performances for the period, with residential apartment sales prices increasing by 1.6% to an average of SR3,317 per sq m, whilst residential villa prices decreased by 2% to SR3,700 per sq m over the same period.
The total volume of residential transactions increased by 11%, whilst the total value of residential transactions declined by 6% in the year to Q4 2020, stated the Knight Frank report.
On Jeddah, the expert said average residential apartment sales prices fell by 2% to SR3,721 per sq m, while the average villa prices fell by 3.1% to SR4,859 per sq.m over the same period.
Residential transaction volumes and values in Jeddah increased by 17% and 16% respectively in the year to Q4 2020, a trend driven by a notable increase in the uptake of mortgages provided by banks and financial institutions, it added.
On Dammam, it said the residential market performance remained fragmented in the Dammam Metropolitan Area (DMA), where residential apartment sales prices increased on average by 0.8% to SR2,930 per sq m, whereas average residential villa sales prices fell by 5.1% to SR3,235 per sq m.
Over this period, the volume of residential transactions saw a decline of 9%, whilst the total value of residential transactions increased by 3%, it added.
Knight Frank pointed out that the Saudi Purchasing Managers’ Index (PMI), which tracks the country’s private non-oil economy, indicates that both economic activity and business conditions are improving and Saudi Arabia’s economy may yet finish the year in a stronger position than expected.
This upturn in business activity is likely to underpin a stronger than expected GDP reading in Q4 2020 and as a result Saudi Arabia’s GDP in 2020 is likely to contract less than the 5.4% rate initially forecast by the IMF, it added.
On the office sector performance, the property expert said the market in Riyadh continued to soften with Grade A rents falling marginally by 0.7% to SR1,450 per sq.m, whilst Grade B rents declined by 2.9% to SR745 per sq.m. The vacancy rate for Grade A office space increased by one percentage point from Q4 2019 to reach 7% in Q4 2020, whilst the Grade B vacancy rate increased by three percentage points to reach 31% over the same period.
Rental performance in Jeddah’s office market remained subdued in the year to Q4 2020, where Grade A and Grade B rents fell by 4.2% and 8.0% respectively. On average Grade A rents were recorded at SR1,000 per sq.m and Grade B rents at SAR 688 per sq.m.
The Dammam Metropolitan Area’s (DMA) office market performance continued to soften in the year to Q4 2020, with Grade A rents falling by 4.8% to SR 906 per sq.m, whilst Grade B rents declined by 8.6% to SR 602 per sq.m.
On the retail sector, Knight Frank said market performance in Riyadh softened in all segments in the year to Q4 2020, with average regional and super-regional mall rents falling by 2.3% to reach SR2,680 per sq.m, whilst average community mall rents fell by 3.4% to reach SR1,975 per sq.m.
The market-wide vacancy rate in Riyadh increased by four percentage points in the year to Q4 2020 to reach 19%. Average vacancy in the malls where landlords offered explicit incentives such as rent free period and discounted rental rates to retain existing tenants and capture new demand remained resilient.
Rents in Jeddah’s retail market continued to soften in the year to Q4 2020, with average regional and super-regional mall rents falling by 2.7% to SR2,669 per sq.m, whilst average community mall rents fell by 3.1% to reach SR1,735 per sq.m.
The Dammam retail market softened across all segments, where average regional and super-regional mall rental rates fell by 2.6% to reach SR2,299 per sq.m, whilst average rental rates for community malls dropped by 3.0% to SR1,640 per sq.m.
The market-wide vacancy rate in the DMA increased by six percentage points to reach 11% in the year to Q4 2020.-TradeArabia News Service