Saudi property buyers opt for prestige towers rather than villas

Rising incomes and changing lifestyles are helping to drive major growth in the supply of high-rise towers in Saudi Arabia’s biggest cities, according to the property consultancy ­Colliers.

In a new report, titled Modern Luxury: The Changing DNA of the KSA High-Rise Residential Market, it argues that the kingdom's skylines are changing, with those seeking luxury accommodation turning to premium high-rises such as the under-construction Kingdom Tower on Jeddah Corniche and projects such as Burj Rafal in Riyadh as opposed to traditional villas.

Residents in the “tri-city” area of Dammam, Khobar and Dhahran are also witnessing an increase in the supply of luxury towers, Colliers said, with the new DTC (Down Town Complex) project, Subeaei Tower and Dhahran Tower.

It said that buyers of units within these towers were seeking a greater mix of apartment types and sizes.

Owner-occupiers typically look for three-bed apartments as their primary residences, but investors will seek smaller units and some buyers will want a small apartment as a second home.

Requirements also change from city to city, with more than 60 per cent of high-end apartment buyers in Jeddah being home to owner-occupiers, while more units in Riyadh are snapped up by investors.

High-rise buildings that have branded hotels and serviced residences – such as Burj Rafal, which has a Kempinski hotel underneath – are in demand, as are landmark projects such as Kingdom Tower.

It is expected to play an important role in developing the surrounding area for Kingdom Holdings – in the same way that Burj Khalifa did for Downtown Dubai for Emaar Properties.

Imad Damrah, managing director for Colliers International in Saudi Arabia, said: “The strong demand for modern luxury high rise residential properties across Saudi Arabia is being demonstrated by high absorption levels among existing towers and pre-booking among forthcoming supply.

“While there is clearly a fundamental change occurring in this market segment, developers need to pay close attention to demand characteristics.

“Those developers with a strong reputation of delivery and partnership with iconic brands and commitment to luxury design, fittings and finishes will be best positioned to capitalise on the market opportunity.”

He added that there was also a gap opening up to provide “affordable luxury” units in the mid-market segment, which he said was “showing signs of undersupply given the overall shift in the market”.

Meanwhile, JLL’s second-quarter report for Riyadh showed a 1 per cent decline in apartment values during the three months to June 30 and a 7 per cent fall in the number of properties changing hands despite an overall shortage in the market.

Recently introduced mortgage regulations effectively mean many buyers need to find a 30 per cent deposit for a home.

Jamil Ghaznawi, the national director and country head of JLL for Saudi Arabia, said the rule changes “have caused downward pressure in the residential sales market”.

Follow The National's Business section on Twitter