Interest in home ownership in Saudi Arabia has fallen from 84% to 40% in just one year due to rising house prices and changing market dynamics.
Knight Frank, a leading independent real estate consultancy in Saudi Arabia said that there has been a significant decline in residential real estate activity, driven by factors including an increasing mobility population of young Saudi nationals and buyers taking longer to make larger deposits to buy a home.
Faisal Durrani, head of research for the Middle East at Knight Franks, said the volume of residential property transactions in the kingdom continued to decline, down nearly 57% in Riyadh and 67% in Jeddah on a year-on-year basis to the end of the first quarter of 2023.
During an interaction with Zawya, he said, “The 40% growth in villa prices during 2022 and 50% growth in apartment values in Riyadh, for instance, has undoubtedly dented buyer demand as households are forced into a holding pattern while they save increasingly larger deposits.”
“Another emerging, but overriding, factor to consider is domestic migration. Young Saudis – 56% of the population aged below 35 – are increasingly mobile in the kingdom, moving from city to city to take advantage of career opportunities. Most of this cohort is not necessarily focused on home ownership,” he said.
Almost 68% of Saudis do not consider themselves permanent residents of the cities where they live and work, Durrani said.
Due to demand, some providers have shifted properties from the sales market to the rental market.
Harmen De Jong, partner at KSA Real Estate Strategy and Consulting, said the decline in residential real estate transactions is characteristic of a cyclical market driven primarily by capital values over the past 12 to 18 months.
“An increase in mortgage rates, impacting the cost of ownership, and a considerable reduction in subsidies in the form of interest-free loans, particularly affecting the lower-income cohorts, have also contributed to the dampened enthusiasm for home purchases,” De Jong said.