Residential transactions in Saudi Arabia, which accounted for 58.7% of all real estate deals by total value, registered a 16% drop in the number of deals to just under 150,000 sales between January and November 2023, according to global property consultancy Knight Frank.

 

The total number of real estate transaction volumes across all asset classes in Saudi Arabia slipped by -17% in 2023 to just over 177,000, while the total value of all deals declined by -9% to SAR 197.7 billion, stated Knight Frank in its Winter 2023/24 Saudi Residential Market Review.  

 

The total number of mortgages issued between January-November 2023 fell by 35%, compared to a decline of 22% over the same period last year, it stated. 

 

Similarly, the total value of mortgages issued plunnged 36% to SAR74.2 billion during the same period as higher interest rates and prices move potential buyers into a longer holding pattern while they amass ever increasing deposits.

 

However, not everything was on the downslide for the kingdom as its capital Riyadh continued to buck the trend through out the year.

 

Unlike the rest of the kingdom, home values in Riyadh continued to climb, stated Knight Frank in its report. 

 

Apartment prices are up 4.5% compared to this time last year, while villa values have increased by 0.5%. Transaction volumes in the capital rose by 7% last year, compared to a 21% fall in Jeddah and a 12% decline in the Dammam Metropolitan Area. 

 

Faisal Durrani, Partner – Head of Research, Mena, said: "The residential market has experienced phenomenal price growth over the last two to three years, with prices in Riyadh, for instance, continuing to climb into record high territory."

 

"Unsurprisingly, the high home values have contributed to growing affordability issues, which have been further exacerbated by the rising cost of borrowing. Indeed, interest rates have jumped from around 0.8% in January 2021 to 6% at the end of last year," he added. 

 

"A further complication in the housing market is the structural shift in demand. Younger Saudi’s are delaying home ownership not only due to affordability considerations, but intra-Saudi migrants are preferentially seeking to rent, rather than own. The impetus to introduce build-to-rent stock, managed to an international standard remains a tremendous market opportunity," he added.

 

Unlike like the rest of the kingdom, home values in Riyadh have continued to climb. Apartment prices are up 4.5% compared to this time last year, while villa values have increased by 0.5%. 

 

Transaction volumes in the capital rose by 7% last year, compared to a 21% fall in Jeddah and a 12% decline in the Dammam Metropolitan Area. 

 

Talal Raqaban, Partner – Valuation, PPP and Deal Advisory, Saudi Arabia, said: "Riyadh sits at the centre of the kingdom’s economic activity. It’s where job creation rates are the highest, in large part driven by Program HQ which has seen 200 companies commit to establishing their regional headquarters in the kingdom."

 

"Even with 241,000 homes due to be delivered by 2030, the projected doubling of the population over this period to 16 million will still result in a housing shortfall of 1.5 million units," he stated. 

 

Knight Frank’s analysis also reveals a decline in deal activity in Jeddah’s residential market. The number of residential transactions registered across Jeddah saw a double-digit decline of -21%, dropping from 23,990 deals in 2022 to 18,897 in 2023. 

 

In addition, the value of transactions declined at a rate of 26% during the same period to end 2023 at SAR20.9 billion.

 

Average villa prices in Jeddah fell marginally by -2.5% during 2023 to SAR 5,085 psm. Q4 2023 alone registered a decrease of 1% in villa values, it added.

 

Yazeed Hijazi, Associate Partner and Co Head of Real Estate Strategy & Consulting at Knight Frank, Jeddah, said: "The decreasing number of transactions is affecting the value of transactions throughout the kingdom, with the main reason being an increase in interest rates, which is leading to affordability issues."

 

"The government is working on ways to revive demand in Jeddah through new large-scale real estate and infrastructure projects, which are expected to boost job creation rates and housing demand levels in the medium to long term," he added.-TradeArabia News Service