Real estate prices in Saudi Arabia rose 1.2 per cent year-on-year during the first quarter, largely driven by residential property prices as government initiatives to promote home ownership among its citizens underpin activity.
Residential property prices, which had been falling due to a decline in the number of expats, rose 2.1 per cent in the first quarter. This was the second quarterly price increase in succession, according to a new report by Cavendish Maxwell. Commercial real estate prices declined marginally by 0.5 per cent.
In Jeddah, one-bedroom apartment prices averaged 875,000 riyals (Dh857,000) and two-bedroom units cost 1.28 million riyals. In the capital city, Riyadh, A one-bedroom apartment averaged 360,000 riyals and the two-bedroom price was 537,500 riyals.
The average price for a 3 bed-room villa in Jeddah was 2.57m riyals and in Riyadh the price of the same unit was 2.8m riyals in the first quarter, data from the report shows.
The Saudi government is aiming to increase the home ownership rate among its citizens to 60 per cent by the end of 2020 and 70 per cent by 2030 from 50 per cent in 2016. It has rolled out a number of initiatives to reach the target including incentivising developers to increase affordable housing offering and making private sector financing more accessible.
It has already lowered mortgage down payments to 5 per cent from 10 per cent and increased banks’ loan-to-value ratio for mortgages of first-time homebuyers to 90 per cent from 85 per cent.
“Whilst the residential sector had started to show signs of recovery, the restrictions imposed towards the end of first quarter 2020 to counter the spread of Covid-19 have impacted economic activity, extending to real estate, hospitality and retail, among others,” the report said.
“The recovery is likely to face near-term headwinds until clarity emerges on the trajectory of the pandemic and economic activity resumes.”
Saudi banks issued 170,275 new mortgage contracts in 2019, compared to 46,885 contracts issued in 2018. By the end of 2020, the kingdom aims to increase total outstanding mortgages to 502 billion riyals from 300bn riyals in 2018.
The commercial sector, on the other hand, recorded declines, falling 0.5 per cent from the same quarter a year ago as "many local and international companies are now reviewing their real estate requirements and expansion plans in the region in light of the impact of the pandemic, especially on the office sector and working preferences".