Saudi property prices surge, but volumes slump

• Riyadh apartment prices rose by 20 percent in 12 months
• Buyers save for longer, resulting in 27 percent decline in deal numbers

Saudi Arabia’s property market is in the midst of a price boom, with the capital Riyadh leading the surge in property prices, according to new research.

London-based property consultancy Knight Frank announced Monday that property prices across Saudi Arabia have skyrocketed at the fastest pace in half a decade.

In Riyadh, the nation’s most important commercial hub, apartments have increased in value by 20 percent, while villas have shot up by 18.6 percent.

In Jeddah, apartment prices have gone up by a more modest 4.9 percent in the last 12 months, while villas rose by 1.2 percent over the same period.

Faisal Durrani, partner – head of Middle East research at Knight Frank, said: “The house price growth in the kingdom mirrors what we are seeing around the world. But in Saudi Arabia, the government’s programmes to boost home ownership have turbo-charged demand, development activity and house prices.”

However, he added that “this significant growth is not without its consequences”.

“Demand is showing signs of being stymied as households find themselves needing to save for longer before being able to transition to home ownership,” he said. “The result is a decline in deal numbers, which fell by 27 percent in the last 12 months.”

Knight Frank’s analysis has revealed that transaction volumes across Saudi Arabia fell to 60,000 during Q1. 

Total deal values have receded by 2 percent to SAR 40.4 billion (£8.5 billion), reflecting the price growth being experienced across the residential sector. 

Durrani said: “With Riyadh’s re-positioning as the kingdom’s economic heart, the city’s workforce is being bolstered by a rise in younger Saudis relocating there to take new jobs.”

“Riyadh’s new and semi-transient residents are displaying a preference for apartments over villas and are also more focused on renting homes than buying them.”

“Despite the receding levels of demand, vendors are either holding firm on prices, or turning to the rental market which is further contributing to the dip in overall deal activity, and exacerbating the shortage of homes available for sale.”

Some of the market situation may be attributable to rising global oil prices – a result of the war in Ukraine and global inflation – from which Saudi Arabia may have benefitted in the Dammam Metropolitan Area (DMA). 

“Anecdotal evidence of increased rates of job creation fuelled by rising oil prices in the kingdom’s oil producing heartland are underpinning rising demand for homes in the DMA, which is in turn helping to lift home values,” said Durrani.