Saudi Arabia’s real estate market will see a “healthy correction” in 2019 after prices surged in the past few years, according to KPMG.
“This correction is expected to continue over the short-term, but the market will pick up in the medium to long term, given the recent government initiatives to incentivise the sector, particularly the Ministry of Housing initiatives,” Islam Albayaa, head of Advisory at KPMG Al Fozan & Partners in Saudi, said in a statement.
Last November, Saudi’s ministry of Housing announced plans to build nearly 19,500 residential units for its citizens under its Sakani housing development programme.
Additionally, new real estate projects are planned throughout the kingdom via public-private-partnerships.
That includes mega developments such as Qiddiya, the Red Sea project and the $500bn NEOM project, which have launched by Saudi sovereign wealth fund Public Investment Fund (PIF).
“These gigaprojects will promote the property market in the newly developed locations especially the second home concept in the kingdom,” said Albayaa.
“Moreover, some of those projects will introduce new asset classes that will increase the real estate investment alternatives,” he added.
Looking at residential property, while villas have historically been more popular in Saudi than apartments, a new trend is emerging among young nationals who are now switching from traditional detached residential units towards smaller units including duplexes, townhouses and affordable apartments, the report said.
“The current economic slowdown and changing mindsets of the youth are driving the new trend. Besides, private investors tend to develop either regular or luxury apartments since they are less price sensitive to the current market volatility,” Albayaa said.
In cities like Riyadh, the launch of the Riyadh Metro has also led to price appreciation for locations closer to the metro stations.
“Research shows that prices per square metre of residential land parcels in districts closer to the metro stations witnessed a slight increase compared to last year,” said Albayaa.
“Moreover, by reviewing some relevant benchmarks, we can deduce that residents tend to live closer to metro stations, therefore, increasing the prices of residential units in the vicinity of such stations,” he added.
A report by consultancy Knight Frank last year ranked Saudi Arabia’s real estate market as one of the worst performers worldwide in the second quarter of 2018, compared to the year-earlier period.
The Knight Frank Global House Price Index found that property prices in the kingdom fell 1.5 per cent in the six months to June 2018.
The country was ranked 55 out of the 57 markets analysed, and was one of only seven countries globally to register price declines.