According to a recent report by consultancy firm Knight Frank, Saudi Arabia’s housing sector is experiencing an 8 percent rise in apartment-linked mortgages over the past 12 months. Buyers are seeking to own affordable homes despite rising costs, and apartments are more feasible as opposed to villas. Notably, the average apartment prices in Riyadh rose by 10 percent from January to June.
Riyadh’s market
The rising cost of borrowing, which escalated from 3 percent to 5 percent last year, has impacted buyers’ purchasing power. Consequently, the number of mortgages issued for villas fell by 2 percent. However, villas still account for the majority of mortgages issued, comprising 68 percent, followed by apartments at 27 percent, and the rest is allocated to residential land plots. Given that the market is already constrained by limited stock and affordability, the rate of inflation rose to 2.8 percent in May as a result of higher housing costs.
The city of Riyadh is experiencing significant population growth, and is projected to reach 15-20 million by 2030. It is forecasted that there will be increased demand for housing, particularly for smaller homes, apartments, and rental properties.Â
Despite the increasing demand, the housing market in Riyadh is facing limited supply. To address this and achieve the government’s goal of 70 percent homeownership by 2030, the Ministry of Housing is offering more options for affordable homes.
Housing programs
Saudi Arabia’s Housing Program, part of the Vision 2030 initiative, is taking steps to foster innovation in the housing sector. To achieve this, the program has partnered with The Stage, a coworking space in Riyadh, to establish a dedicated meeting space for housing industry enthusiasts. The collaboration aims to promote innovation in the housing sector, raise awareness about the program’s initiatives, and create valuable knowledge resources.
Read more:Â Institutional support to boost Saudi housing market in 2023
The CEO of the Housing Program, Nowfal Al-Salamah, expressed enthusiasm about the partnership, stating that it marks the first step towards building an effective society to serve the housing sector. The program, launched in 2018, focuses on developing the Kingdom’s real estate industry through collaborative programs that stimulate investment and enhances market efficiency. The initiative aims to shape the future of the housing sector by fostering innovation and creating a dynamic ecosystem for stakeholders.
Housing in other KSA cities
In Jeddah, villa prices experienced a 1 percent growth in the second quarter of the current year, while average apartment prices increased by 2 percent during the same period. In Dammam, the market showed contrasting performance, with average apartment prices increasing 5 percent during the second quarter of this year compared to the same period in 2022. However, villa prices in Dammam dropped 2 percent in the second quarter of 2023 compared to the same period the previous year. The report attributed the higher demand for apartments in Dammam to their affordability and the limited availability of villas.
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