The residential market in the Saudi city of Jeddah continued to slump in the first quarter of the year, with average rents down 8.5 per cent year-on-year, according to a report by property consultancy JLL.
On a quarter-on-quarter basis as well, rents were down by 9 per cent, the report found.
“Following the economic slowdown of the market in 2016, and the subsequent departure of a large number of expatriates, the rental market now sees more room for negotiation, forcing the rental values to go down,” JLL stated.
The Saudi economy has been hit hard by the drop in oil prices, and with companies forced to contract, several expatriates lost their jobs and left the country.
However, Jeddah continued to see new supply enter the market in the first quarter of the year.
The Farsi Seven Towers, another addition to the high-rise segment of the market located on Obhur Creek, was completed in Q1, said JLL.
Further high-rise towers are currently under development or planned along in the Corniche stretch and within the city, including: Abraj Al Hilal 2 and Emaar Residences by Emaar, Golden Tower by Solidere, and Bayat Plaza Tower by Sabban Group.
The total stock of housing in Jeddah at the end of the quarter stood at approximately 806,000 units.
Diyar Al Salam Residences (140 apartments) and Gardenia Residences (370 apartments) on Madinah Road, two of three developments offering lifestyle living in the area, are expected to be handed over later this year, the report added.
Looking ahead, the new Ejar (leasing) regulation – introduced by the Saudi Arabian government in February 2017- will also have an impact on the residential sector across the country, JLL pointed out.
The new regulation comes as part of the government’s initiative to regulate the private sector, accelerating the development of more units into the market.
It is expected to “create an attractive environment” for investors, while also increasing confidence in the housing sector, where affordable housing is the main focus throughout 2017, JLL said.
“With Vision 2030 in place, and the economy adjusting to lower economic growth, 2017 is set to become a watershed year for the kingdom’s real estate market,” said Craig Plumb, head of research, JLL, MENA.
“We predict there will be increased activity in the real estate sector through the public investment fund (PIF), the listing of further REITs (Real Estate Investment Trusts), taxation reforms and a series of public private partnerships or PPP’s.
“The kingdom is keen to move towards diversifying the economy and as a result the government is expanding the leisure and tourism sector to attract visitors to the country,” he added.