Unaffordability, lack of supply drag Saudi Arabia home prices

Has the market hit bottom yet? Knight Frank analysts think it’s imminent

Residential property prices in main cities across Saudi Arabia plunged in the first six months of 2019 amid rising transaction volumes, suggesting the property cycle may have bottomed out, The National is reporting.

According to Knight Frank, apartment prices in the capital Riyadh bled six percent annually in the second quarter of 2019 and 10 percent in the first quarter.

Similarly, Jeddah apartments posted a negative annual growth of eight percent in the second quarter, following a plunge of 11 percent in Q1 2019.

“The rising affordability challenge and the lack of suitable supply for middle and lower tier buyers continue to weigh on the sector,” The National quoted Raya Majdalani, research manager at Knight Frank, as saying.

The home price falls parallel the economic downturn that has impacted Middle Eastern countries since 2016.

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Government schemes to diversify from oil and improve affordability levels in the residential market have proven successful to an extent, triggering development activity in the affordable property segment, the report stated.

“In H1 2019, we have seen a significant pick up in transaction volumes across key cities which indicates that the market may be heading towards the bottom of its cycle,” Majdalani said.

In Riyadh alone, the volume of transactions surged by 66 percent in the year to the first half of 2019, while that in Jeddah increased 56 percent.

The cities of Dammam and Khobar also saw transaction volumes rise 32 percent.

As a result, recovery in the kingdom’s housing market could occur “in the short-to-medium term”, Knight Frank researchers predicted.