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Saudi Arabia has a big untapped market of first- and second-time property buyers, with a number of homeowners and tenants in the kingdom looking to invest in a residential unit, according to a new study by Knight Frank.
The global property consultant’s annual survey of 1,003 Saudi nationals found that 44 percent of homeowners have plans to acquire a second home for personal use. More than 80 percent of residents currently renting in the kingdom are also looking to buy a home in the next 12 months.
The results of the study, conducted among households around the cities of Riyadh, Jeddah and Dammam, have highlighted the “depth and breadth of demand” for homes in Saudi Arabia, Knight Frank said.
Second-time buyers
Among the homeowners who are looking to buy, 49 percent said the purchase would be driven by investment considerations, specifically rental yields, while 44 percent said the second property will be solely for family use.
“It is clear there is a vibrant second homes market that is waiting to bloom,” said Faisal Durrani, partner – head of Middle East Research at Knight Frank.
“For the very first time, we have been able to quantify the quantum of demand for second homes in the kingdom. With 44 percent of households keen on acquiring another home, the substantial size of the yet untapped second homes market has been unmasked,” he said.
Budget
However, Durrani said developers in Saudi Arabia need to be wary of the size of the pool of second-time property buyers, including their budgets. In Knight Frank’s survey, only 29 percent of potential buyers have budgets of more than $800,000.
“Our understanding suggests that most Giga projects are planning the bulk of starting prices at around $1 million, suggesting there may be a risk of an oversupply of luxury homes in the future,” he said.
Second home budgets are believed to be lowest in Riyadh, with 22 percent of the respondents saying they are willing to spend more than $800,000, while more people in Dammam (28 percent) and Jeddah (45 percent) are open to spending the same.
First-time buyers
Knight Frank’s survey also found that there is a big market for first-time buyers in the kingdom as well, with 84 percent of tenants in Saudi Arabia saying they want to buy their first home within the next 12 months.
Nearly half (48 percent) of the tenants are willing to spend between $200,000 and $800,000, with about a third (31 percent) saying they are keen on buying a villa. A further 48 percent are looking to acquire an apartment.
However, Knight Frank said there is a discrepancy between expectations and market realities.
Property prices in some Saudi cities have increased since 2019, with those in Riyadh registering a 14.4 percent growth. Average two-bedroom good quality flats in Riyadh now command a price tag of 750,000 riyals ($199,000), while three- or four-bedroom villas usually sell for in excess of 2.3 million riyals.
(Reporting by Cleofe Maceda; editing by Mily Chakrabarty)
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