Up to 30,000 additional homes could be supplied in Jeddah by 2020, where the current supply stands at around 800,000 units.
The majority of this upcoming supply could be provided by Al Ra'idah Investment Company, owned by Saudi Arabia's Public Pension Agency.
Al Ra'idah is expected to deliver 6,160 apartments and 1,180 villas across Jeddah in different phases.
Additionally, prominent residential developments, such as Gardenia Residence, Al Farida, al Mayar, Masharif, Diyar Al Salaam, and Al Hilal Tower 2, are also likely to boost residential supply in Jeddah.
KPMG Al Fozan and Partners said the majority of this new supply is focused "towards the north and east sides of the city, as the central zones have become saturated".
Limited availability of land is a key determinant of where homes are developed in Jeddah. Similarly, seafront areas are expected to offer opportunities for high-end products in the future.
It is likely that the upcoming residential units will impact Jeddah's rental values, which declined by 10-15% in 2017.
The price movement was "contrary to the upward trend witnessed in the preceding years", according to KPMG Al Fozan and Partners.
According to a real estate market report produced by the audit firm, the rental drop was caused due to expat families, especially those with middle-level incomes, departing the city, which raised vacancy rates in the market.
KPMG Al Fozan and Partners' report added that sale prices and rental rates of residential villas also "continued to decline during 2017", with the trend first noticed after the implementation of the White Land Tax in the kingdom.
The tax, according to the audit firm, "led to cautious behaviour from investors and end-users, resulting in a considerable drop in activities in the segment".
Average sale prices of villas in Jeddah's western districts are around $1,870 (SAR7,000) per square metre, while average rentals range from $32,000 (SAR120,000) to $40,000 (SAR150,000) annually.
Rents in Jeddah's western districts vary based on, among other factors, "quality of construction and finishing, construction age, and proximity to major commercial areas".
Eng Rani Majzoub, head of real estate at KMPG Al Fozan and Partners, said the correction in sale prices and rents would "serve the interest of [Saudi] nationals by reducing the cost of housing, which is a primary objective of any government".
He added: "The attractive investment opportunities [are] for real estate developers who bring with them value-added products and services, and take into consideration the needs and abilities of their end users, since the old strategy of buying, keeping, and speculating land prices has no future potential."