Saudi Arabia’s turbulent economic climate has taken another blow as a new report reveals the capital’s real estate sales fell by 6 per cent during Q1.
Data revealed by the Kingdom’s ministry of justice showed that Riyadh witnessed its biggest fall in residential property transactions since the introduction of the mortgage regulations in November 2014.
And now, a report by property consultancy company JLL has shown the city’s year-to-year sales prices have fallen by 4 per cent and 6 per cent for apartments and villas respectively.
Rental rates for villas and apartments were also found to have decreased marginally by around 1 per cent across Riyadh.
However, the report said there was some positive news in that sale prices for both villas and apartments did stabilise since the last quarter,
The report comes as the kingdom attempts to combat its perennial problems with housing shortages, particularly at the affordable end of the market.
An earlier report by JLL pointed out that 60 per cent of households in the country fall within the middle-income segment, which it defines as those earning between 6,000 and 20,000 riyals per month. On such salaries, most areas, including in Riyadh, are unaffordable for those looking to buy property.
The government has since announced plans to launch a state-backed development company and will also partner with a consortium led by the South Korean contractors Hanwha E&C and Daewoo E&C for up to 100,000 new homes to be built near King Khalid Airport north of Riyadh over 10 years. The deal is reportedly worth US$20bn.
The Saudi Arabian Monetary Agency (SAMA) has increased the maximum loan-to-value (LTV) ratio for mortgages from 70 per cent to 85 per cent for real estate finance companies.
The JLL report said: “Although these companies represent a small portion in comparison to local banks, this move should make housing more affordable and therefore strengthen demand.”