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Saudi Arabia’s real estate activity is expected to rebound this year after a recent slowdown, with residential transactions in key markets already showing signs of an upswing.
In its latest report, CBRE Group said the number of residential transactions increased by 12.7 percent in Riyadh from 2020 to 2021, after falling by 20.9 percent from 2019 to 2020. Another key market, Jeddah also saw an increase of 6.7 percent from 2020 to 2021, although numbers in Dammam dropped by 14.9 percent.
CBRE said the latest data indicate that there is a likelihood of a marked rebound in real estate activity in 2022.
Average apartment prices in Saudi Arabia have likewise increased by 12 percent in Riyadh in the year to Q4 2021, 13 percent in Jeddah, 7.7 percent in Dammam and 15.3 percent in Khobar, Eastern Saudi Arabia.
However, overall residential transaction volumes fell by 5.3 percent in 2021, despite an 11.7 percent increase in the number of mortgage contracts.
The total value of mortgages issued in the kingdom decreased by 1.2 percent year-on-year, with single-family residences accounting for 78.3 percent of the transactions.
Price increase
In its Saudi Arabia Market Q4 Market Review and 2022 Outlook, CBRE said the increase in prices has largely been driven by the delivery of new stock, where the average price per square metre has tended to be higher than historic stock.
Meanwhile, in the commercial sector, CBRE said occupiers are looking to increase the size of their office spaces or upgrade it to a higher quality segment, but supply in the Grade A office segment remains materially constrained, the report said.
Grade A office rents have, as a result, risen by 9.8 percent in 12 months, while Grade B rents have risen by 1.3 percent.
In the hospitality sector, hotel occupancy rate increased by 2.3 percent in the kingdom, still 18.2 percent below its 2019 level.
Khobar bucked the trend, achieving revenue per available room (RevPAR) of 11.9 percent above the 2019 level.
Supporting factors
The real estate services company said the easing of COVID-19 restrictions and the return of events and conferences are likely to fuel a rebound in the sector over the coming year.
However, Khobar, which has benefitted from increased domestic tourism while travel restrictions have been in place, may see a decrease in hotel occupancy, it said.
“Looking ahead, with travel and length of stay restrictions easing, we expect that KPIs will start to see a more sustained recovery ensue over the course of 2022,” said Taimur Khan, head of research, MENA.
“These changes will particularly benefit the holy cities, as restrictions on pilgrimages are materially reduced. Secondly, the return of conferences and exhibitions is expected to underpin visitation to Riyadh and, to an extent, Jeddah.”
(Reporting by Imogen Lillywhite; editing by Cleofe Maceda)
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