Gulf Construction Online - Capital ‘lacks low-cost housing’

Saudi Focus

Capital ‘lacks low-cost housing’

01 October 2016

There is an increasing demand for affordable housing in Riyadh as the population growth continues to outstrip property market supply in the kingdom’s capital, a report said.

Riyadh’s population has grown by 52 per cent over the past 15 years and currently stands at 6.5 million in 2016, according to the Riyadh Real Estate Market Overview for Q2, 2016 from Chestertons KSA. However, only 500,000 units have been built during the same period, leading to a dearth of low-cost housing across the capital.

“The Saudi government is all too aware of the acute shortage in low-cost housing units, but continuing low oil prices have resulted in inevitable cuts in public spending, which has in turn hit public housing projects,” said Declan McNaughton, managing director UAE, Chestertons Mena.

“So far the impact on rental rates has been minimal, but it is beginning to drive prices higher in some areas that have traditionally provided value-led accommodation for budget-conscious tenants,” he added.

Average annual rental rates for apartments in Riyadh are currently $7,182 (SR26,935).

The office and commercial sector has seen a number of projects completed in the first half of 2016, including Al Nakel Tower, which alone increased the city’s supply of office space to 2.5 million sq m of gross leasable area. Vacancy rates generally remained stable at 16 per cent while there was a slight decline experienced in the business district. Furthermore, rents rose slightly across different areas of the city reaching up to $341 (SR1,280) per sq m.

“While there have been some major projects completed, there have been further delays to the King Abdullah Financial District development. We expect there to be around 800,000 sq m of leasable area by 2018, up from 160,000 sq m in 2016,” added McNaughton.