Saudi Arabia’s residential real estate sector is witnessing a remarkable upswing in the second quarter of 2024. According to CBRE Middle East, major cities like Riyadh, Jeddah, and the Dammam Metropolitan Area (DMA) have experienced significant annual growth in residential transactions. This surge is attributed to a combination of increased buyer confidence, new property deliveries, and enhanced financing options, setting a positive trajectory for the housing market in the Kingdom.
Impressive Transaction Growth in Key Cities
Saudi Arabia’s primary urban centers have shown substantial increases in residential transaction volumes over the past year. Riyadh leads the pack with a 51.6% annual improvement, followed by Jeddah at 43.2%, and the Dammam Metropolitan Area (DMA) at 22.4%. These figures reflect a strong underlying demand for residential properties amidst a backdrop of economic stability and government-led infrastructure projects.
- Riyadh: 51.6% annual growth
- Jeddah: 43.2% annual growth
- DMA: 22.4% annual growth
This growth is particularly noteworthy given the challenges posed by the pandemic, highlighting the resilience and adaptability of the Saudi residential market.
Driving Forces Behind the Residential Boom
Several factors are fueling the robust growth in Saudi Arabia’s residential real estate market. The anticipation of new, modern housing stock is a major contributor, as buyers seek quality finished units to replace older, less desirable properties. Additionally, the availability of suitable financing options has empowered a broader segment of the population to invest in homeownership.
Key Drivers:
- New Housing Deliveries: Introduction of high-quality, modern residential units.
- Financing Accessibility: Improved mortgage provisions facilitating home acquisitions.
- Government Initiatives: Efforts to bolster retail financing through local banks.
Matthew Green, Head of Research MENA in Dubai, stated, “The fundamentals for Saudi Arabia’s residential sector remain incredibly strong, as reflected in the sustained rental growth across key markets in the Kingdom.”
Market Trends and Pricing Dynamics
The residential market in Riyadh has seen consistent price appreciation, particularly in the apartment segment. Over the past four years, apartment sales values have increased by approximately 11.7% per annum, reaching an average of SAR5,000 per square meter by the end of Q2 2024. Villa prices have also shown a steady rise, with average values now at SAR5,824 per square meter, up 3.3% year-on-year.
| City | Property Type | Price Increase (YoY) | Average Price (SAR/m²) |
|---|---|---|---|
| Riyadh | Apartments | 11.7% | 5,000 |
| Riyadh | Villas | 3.3% | 5,824 |
| Jeddah | Apartments | -0.9% | 3,945 |
| Jeddah | Villas | 4.4% CAGR | 5,707 |
In contrast, Jeddah’s apartment market has experienced a slight decline of 0.9% in average prices over the year to Q2 2024, although it maintains a long-term growth trend since 2020.
Future Outlook and Expert Insights
Looking ahead, the residential market in Saudi Arabia is poised for continued growth, driven by strong employment rates and population expansion. However, certain areas like Jeddah have seen a dip in apartment prices due to increased supply and government initiatives to regulate the market through platforms like EJAR.
Expert Projections:
- Riyadh: Expected to remain undersupplied with ongoing population and employment growth.
- Jeddah: Stabilization anticipated as new deliveries catch up with demand.
- DMA: Steady growth aligned with broader economic developments.
“Riyadh particularly is demonstrating attributes of an undersupplied market, driven by strong employment and population growth on the back of government investment projects, resulting in very tight supply in certain areas of the market as new deliveries fail to keep pace with the robust housing demand,” added Matthew Green.
As the Saudi residential market continues to evolve, the balance between supply and demand will play a crucial role in shaping future trends, ensuring sustained growth and stability in the housing sector.
