The residential prices in Riyadh, Saudi Arabia, have risen by five to seven per cent in the past year
and are expected to continue to move in an upward direction in the short- to medium-term, with new supply unlikely to be able to fully offset demand, a report said.

According to the Saudi Arabian Monetary Agency (SAMA), in the 10 years to 2013, the number of inhabitants in the kingdom increased by 36 per cent to 30 million. Riyadh - which accounts for one-quarter of Saudi Arabia's total population - has been among the fastest growing cities in the state in recent years.

Partly because of this, and the fact that the capital has seen an undersupply of new housing for a number of years, Riyadh currently suffers from an acute shortage of housing, explained the Riyadh Residential Market Report for the second half of the year released by Knight Frank KSA, a leading real estate consultancy.

Department of Statistics and Information (CDSI) show that the average household size in the administrative region of Riyadh is 5.6, and only 60 per cent of housing units in Saudi Arabia are owner-occupied.

By comparison, the levels of owner-occupation in the neighbouring countries of the UAE (75 per cent), Qatar (80 per cent), Bahrain (82 per cent) and Oman (83 per cent) are much higher, the report noted.

Stefan Burch, Saudi Arabia general manager at Knight Frank said: ''in order to address the housing undersupply issue, the government has launched a number of projects in recent years - although not all of these have achieved the success that had been envisioned. For example, in 2011, the government announced a programme of works to build 500,000 homes across the kingdom.”

Due to lack of land availability, the scheme struggled to grain traction, but another more recent initiative was the introduction of the mortgage law, which, if successful will provide low and middle-income Saudis trying to get on the first rung of the property ladder easier access to finance. This law is projected to increase the kingdom's homeownership by 80 per cent by 2024.

The Knight Frank research report identified that in the short to medium-term, urban regeneration will play an increasingly important role in Riyadh as existing road and power infrastructure limits the extent to which the city can expand.

The planned metro will potentially regenerate neighbourhoods close to the stations. There is also a need for a more varied residential product. While Riyadh is dominated by low rise development, young Saudis looking to get on the first rung of the housing ladder are faced with little choice in terms of the type of residential stock available.

“Over the next couple of years, we see residential prices continuing to rise in Riyadh as the city's rising population exacerbates the already acute housing shortage. Beyond that period, improving infrastructure, as well as new international developers entering the market, should boost construction activity and thus housing completions,” Burch concluded. – TradeArabia News Service