Affordable housing to drive growth in Riyadh’s property market: JLL

Growth in Riyadh's residential property market will be driven by affordable housing, supported by the Saudi government’s continued focus on increasing home ownership amongst its nationals, consultancy firm JLL said in a new report.

In line with the National Transformation Program 2020, the Ministry of Housing aims to increase home ownership for nationals from 47 percent to 52 percent through boosting affordable residential supply.

A continued focus on this sector was evident in Q2 2018 with the ministry announcing eight new public-private partnership agreements and the distribution of 105,174 affordable residential products during the year to May 2018, JLL said.

Despite there being little change in market conditions, the latest such project, initiated by the Public Investment Fund (PIF), is Qiddiya, which includes a significant residential component and aims to attract 17 million visitors to the entertainment sector, 12 million retail visitors and 2 million hotel visits by 2030.

“While some developers are expanding their high-end offering, most remain focused on the affordable sector of the market in line with the governments’ continued focus on driving home ownership for nationals. This will continue to be a key driver for the real estate market overall,” said Craig Plumb, Head of Research, MENA, JLL.

A total of 7,500 housing units were delivered in Q2, taking the total residential stock to 1.26 million units in Riyadh. Nearly 7,500 units are expected to be completed in Q3, the report noted.

Following impressive Q1 activity in the retail sector, an “even higher rate of activity” is expected in the second of the year compared to H1 2018. However, vacancy rates rose 3 percent year-on-year (YoY) in Q2, to reach 12 percent. Rents continued to fall in single-digit rates, with the community malls being the “worst performing relative to super regional and regional malls.”

Meanwhile, the office market saw the addition of 42,000 square metres in Q2. The second half  of 2018 is expected to see a “more significant increase in activity” with approximately 151,000 square meters scheduled for completion.

Due to the delays of some future projects, property owners of existing buildings with low vacancies were able to maintain rents at their current levels, the report added.

The hotel sector remained “inactive” with no notable completions in Q2. Room rates declined 5 percent YoY to reach $182 in May, while occupancy levels remained unchanged at around 59 percent relative to the same period last year, JLL said.