Saudi Arabia’s real estate sector will witness “healthy correction” in 2019 after years of price hikes, according to an expert from KPMG Al Fozan & Partners.
Islam Albayaa, the organisation’s head of advisory, said government initiatives will lead the Saudi Arabian real estate market to stability after “prices surged” in the last few years.
The current economic slowdown and changing mind-set of the youth are driving new trends.
He continued: “This correction is expected to continue over the short term, but the market will pick up in the medium to long term, given the recent government initiatives to incentivise the sector, particularly the Ministry of Housing’s initiatives.”
Albayaa cited the ministry’s plan to build 19,500 homes for Saudi citizens, announced in November 2018 under its ‘Sakani’ programme, as a major driver for the market in the months to come. Additionally, Saudi Arabia’s gigaprojects, such as the Public Investment Fund-backed Neom, Qiddiya, and Red Sea Project, are also expected to buoy property transactions in Saudi Arabia.
These benefits, according to KPMG Al Fozan & Partners’ expert, will come as the kingdom’s under-construction Riyadh Metro nears its completion. Properties located close to the $23bn (SAR86.3bn) megaproject’s metro stations have also witnessed land price appreciation.
“Research shows that prices per square metre of residential land parcels in districts closer to [Riyadh Metro] stations witnessed a slight increase compared to last year,” Albayaa said.
“Moreover, by reviewing some relevant benchmarks, we can deduce that residents tend to live closer to metro stations, [thus] increasing the prices of residential units in the vicinity of such stations.
“Saudi Arabia’s gigaprojects will promote the property market in newly developed locations, especially the second home concept in the kingdom. Moreover, some of those projects will introduce new asset classes that will increase the real estate investment alternatives,” he continued.
Finally, as Albayaa explained, apartment owners and operators are also likely to see growth in Saudi Arabia, as kingdom’s historic preference for villas makes way for the younger generation’s preferences, which include “switching from traditional detached residential units” to smaller homes, such as “duplexes, townhouses, and affordable apartments”.
“The current economic slowdown and changing mind-set of the youth are driving the new trend,” he explained.
“Besides, private investors tend to develop either regular or luxury apartments since they are less price-sensitive to current market volatility.”