Dar al-Arkan, Saudi Arabia's biggest property developer, reported a 31.4 percent drop in second quarter net profit on declining sales, missing forecasts.

Dar al-Arkan made a net profit of 297.8 million riyals  ($79.4 million) in the three months to end-June, compared with 437 million riyals a year earlier, it said in a statement posted on the bourse website on Wednesday.     

Analysts surveyed by Reuters expected on average the company to post a net profit of 326.6 million riyals for the quarter.

"The decline in second-quarter net profits ... is due to lower sales as the company tries to improve profit margins at its stock land plots," the firm said in the statement.

Operational profit dropped 37.9 percent to 305.7 million riyals in the quarter. Some 80 percent of Dar al-Arkan's assets of about 23 billion riyals are land plots in the kingdom, where analysts say properties are hard to value.

Saudi Arabia is facing a housing shortage and plans to build 500,000 new homes to cater for its growing population of over 27 million.

A report by Banque Saudi Fransi in March said developers needed to build about 275,000 units a year through 2015 to meet demand in the world's top oil exporter for about 1.65 million new homes. - Reuters