Dubai most preferred foreign investment location for Saudi home buyers – Knight Frank

Beyond Saudi Arabia, Dubai is the most preferred potential target city for the kingdom’s HNWI’s to buy a home.

The findings were released by way of Knight Frank’s annual 2022 Saudi Residential Survey carried out in partnership with YouGov.

The annual survey spoke to 55 HNWIs in Riyadh, Jeddah and Dammam. Sixty-five per cent of those surveyed named Dubai as a place they would like to buy a home. Nineteen per cent said they would potentially spend up to $500,000, while a further 25 per cent would commit up to $1m. Twenty-five per cent are ready to spend between $1-3m.

Read: Dubai records real estate transactions worth Dhs300bn in 2021

Meanwhile, other findings from the report found that 73 per cent of the surveyed HNWI’s in Saudi Arabia are planning to buy a second home over the next 12-months.

In terms of budgets for their next purchase, 24 per cent will spend between $800,000-$1m, while a further 25 per cent will spend up to $2m. Twenty-six per cent plan to spend under $600,000. Forty-five per cent say their stated budgets are representative of their equity contribution.

Also, 55 per cent of the HNWIs would use the property themselves, while 33 per cent will make the acquisition for investment purposes.

When it comes to property preferences, HNWI in the kingdom prefer villas (50 per cent) to apartments (43 per cent) for their next acquisition, according to Knight Frank.

“The preference for villas over apartments amongst the kingdom’s wealthy does not come as a surprise. What is interesting is how this demand varies by net worth. Fifty-seven per cent of those with a net worth of over $1m, excluding their primary residence, are in favour of villas. Those with a net worth of $500,000-$1m, however, are slightly more interested in apartments at 47 per cent, compared to villas. What’s more, this is group is also twice as likely (11 per cent) to be interested in branded residences,” said Faisal Durrani, partner – head of Middle East Research, Knight Frank.

Harmen de Jong, partner – real estate strategy and consulting, Knight Frank, added, “There are differences at a city level too. HNWI’s who already own a property in Jeddah prefer apartments at 53 per cent, while those owning in Riyadh strongly lean towards villas at 67 per cent. Out of all HNWI subgroups, those who own property in Riyadh value branded residences the most at 13 per cent. Those with a net worth of $500,000-$1m are more likely to have dual motives with 32 per cent of HNWI in this group contemplating a purchase for both personal and investment reasons. In contrast, 43 per cent of those with a net worth of over $1m are twice as likely to purchase purely for investment reasons.”

Second homes
Apart from surveying the HNWIs, Knight Frank also surveyed 1,003 Saudi national households around the cities of Riyadh, Jeddah and Dammam and found that 44 per cent of homeowners in the kingdom are looking for a second home for personal use.

“For the very first time, we have been able to quantify the quantum of demand for second homes in the kingdom. The scales are relatively evenly balanced in terms of the intended use, with 49 per cent of homeowners saying the purchase would be driven by investment considerations, specifically rental yields, while 44 per cent say it will be solely for family use. These findings will undoubtedly strengthen the resolve of the kingdom’s giga project developers to deliver their planned mostly-luxury residential developments,” said Durrani.

Knight Frank’s survey also shows that second home budgets are lowest in Riyadh, with 22 per cent of respondents in the capital willing to spend over $800,000, while this figure is much higher in both Dammam (28 per cent) and Jeddah (45 per cent).

De Jong pointed to the average age of Saudis which will likely have an impact on the decision to buy homes. “The young demographic of the country – 56 per cent are below the age of 35 – are expected to be less in favour of multi-generational living going forward, creating even more demand for housing,” said De Jong. “Furthermore, with job creation rates accelerating in the Kingdom’s economic heart, Riyadh, demand for single-person dwellings is likely to accelerate, hinting at the start of a structural shift in the market’s demand dynamics, which should offer some encouragement to developers planning for a doubling of the city’s population to over 15 million by the end of the decade”.

Knight Frank’s survey also investigated the homeownership aspirations of the Kingdom’s residential tenants. The survey has revealed that 84 per cent of tenants want to buy their first home within the next 12-months.

Knight Frank noted that apartment prices have risen 14.4 per cent in Riyadh since 2019. Average two bedroom apartments in Riyadh, of a good quality sell for over SAR750,000, while three- or four-bedroom villas usually sell for in excess of SAR2.3m.

Knight Frank adds that 80 per cent of Saudi tenants will be looking to buy their first home within the kingdom.