Real Estate Saudi families pause plans to buy property as villa prices rocket By Pramod Kumar March 21, 2023 Neom Knight Frank's survey found that Neom was the No 1 target for wealthy property investors Home sales fell by 34% in Riyadh and 16% in Jeddah in 2022Domestic migration is a key driver of demand, said Knight FrankWealthy GCC investors eye property in Neom Rising home prices are forcing Saudi families to pause plans to get on the property ladder, according to real estate consultancy Knight Frank. The agency’s Saudi Report 2023, which is based on a survey of 1,014 Saudi-national households, found that only 40 percent of tenants were keen to buy a home this year, down from 84 percent in 2022. Faisal Durrani, partner and head of Middle East research at Knight Frank, said: “The rapid escalation in house prices has undoubtedly cooled demand to purchase a home.” Saudi property investors pursue growth in UK regionsS&P and Moody’s stay ‘positive’ on Saudi Arabia’s non-oil reforms Villa prices in Riyadh have increased by 45 percent over the past two years to more than SR5,000 ($1,333) per square metre, Durrani added, forcing households into a “holding pattern”. The total number of homes sold in the Saudi capital fell by 34 percent last year, Knight Frank found. There was a 16 percent drop in Jeddah. Durrani said the ratio of house prices to household incomes in the two cities was well above international averages. “With villas in Riyadh and Jeddah standing at 13.3 and 15.1 times annual incomes, affordability thresholds have been exceeded. “A globally accepted level of affordability is usually six times annual incomes. The last time affordability ratios in Saudi stood at these levels was in 2016, which also coincides with the last market peak.” Knight Frank does not expect house prices to decrease any time soon, but rather a stagnation as demand continues to build. Harmen de Jong, partner and head of real estate strategy and consulting for Saudi Arabia, said domestic migration had been a key driver of housing demand. “Our surveys have helped us to estimate that the level of domestic migration could be as high as 47 percent of the total number of Saudis in Riyadh, 42 percent in Dammam and about a third in Jeddah,” he said. Not all of these “career migrants” would be keen to buy a property in their adopted cities, but 68 percent said they would move home should the right job arise, de Jong added. “The critical consideration for the country’s developers will be how to cater to this typically young and footloose generation of Saudis, many of whom are finding themselves priced out of the homeownership market,” he said. The Knight Frank survey, conducted with YouGov, has also found that wealthy investors across the GCC are more interested in property at Neom than any other giga-project in the kingdom. About 29 percent of the high net worth individuals surveyed is looking at the futuristic city. Neom is No 1 on the giga-project popularity list for the second year running, Durrani said, but the rest of the league table has seen a significant shake-up. Last year, the Red Sea Project and Diriyah Gate were in second and third place respectively. This time, they have been replaced by Jeddah Central (19 percent) and King Salman Park (10 percent). The Red Sea project has slipped to fifth, which Durrani said was because it is among the most developed giga-projects. Al Ula remains the favoured spot for the ultra-wealthy, with the historical city attracting the largest proportion of would-be purchasers willing to spend upwards of SR5.5 million.