Saudi Arabia property prices set for correction in 2019

The kingdom’s gigaprojects to likely help the sector recover though

Jeddah, Saudi Arabia. Bin Sumaidea/Shutterstock

Saudi Arabia’s real estate market is set for a “healthy correction” in 2019, Gulf Business reported, citing data from KPMG.

The correction will persist over the short term, although the market will pick up in the medium to long term, given the recent government initiatives to incentivise the sector, particularly the Ministry of Housing initiatives, according to Islam Albayaa, head of advisory at KPMG Al Fozan & Partners in Saudi.

These initiatives, which include the Saudi royals’ highly publicised gigaprojects, are foreseen to promote the property market in newly developed locations.

These include Qiddiya, slated to be the world’s largest entertainment city on completion by 2030; the Red Sea project, a luxury mixed-use destination with a year-round temperate climate; and the NEOM project, a USD500-million mega-city.

The Ministry of Housing also announced in November plans to build 19,500 residential units under the Sakani housing development programme.

“Moreover, some of those projects will introduce new asset classes that will increase the real estate investment alternatives,” Albayaa added.

The current economic slowdown and changing market behaviours, led by younger property seekers, will drive a shift in demand toward smaller units such as duplexes, townhomes, and affordable apartments, KPMG predicted.

“Besides, private investors tend to develop either regular or luxury apartments since they are less price sensitive to the current market volatility,” Albayaa said.

The Saudi Arabia economy contracted in 2017, with growth expected to hit 2.4 percent this year, according to the International Monetary Fund.