Saudi property prices hold up despite drop in sales

Reuters/Faisal Al Nasser

• Deals down but prices up
• Mortgages fall by 37%
• Only Jeddah prices slide

The Saudi residential property market is beginning to take a hit from the economic slowdown caused by the kingdom’s oil production cuts.

Yet according to figures published by real estate consultancy CBRE, prices remain resilient in the face of a fall-off in third quarter sales.

A total 61,473 transactions took place in the third quarter, down 7 percent on the same period in 2022. The total value of the transactions fell more than 11 percent to SAR45.9 billion ($12.24 billion), the group said.

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The number of mortgage contracts for the year to the end of the third quarter was down 37.5 percent on the previous year, while the total value registered fell by 38 percent to SAR18.40 billion. 

Oil output cuts, designed to prop up oil prices, have caused a significant slowdown in Saudi Arabia’s economic growth. 

The government expects GDP growth to slow sharply in 2023 to 0.03 percent, from 8.7 percent in 2022, with a budget deficit of 2 percent of GDP. 

The Saudi General Authority for Statistics reported last week that oil accounted for 80 percent of total exports and the production cuts had resulted in total exports decreasing by 17.1 percent year on year to SAR103.8 billion in September.

The Public Investment Fund (PIF) said this week it intends to invest SAR4 trillion in the real estate sector over the next 10 years as part of its remit to fund giga-projects intended to diversify the Saudi economy away from oil. 

Hattan Alsharif, senior research analyst at CBRE, put the fall in transactions down to the impact of high US interest rates and the high cost of construction materials in Saudi Arabia, but noted that real estate values are holding up in most of the country. 

In Riyadh apartment prices grew 16 percent to SAR4,780 per square metre by the end of the third quarter, in Khobar they grew almost 3 percent to SAR3,424 per square metre, and Dammam prices rose by over 2 percent to SAR2,862 per square metre. 

Among the major conurbations, only Jeddah saw a fall of 9.5 percent to SAR3,872 per square metre. 

The same was true for villas. Riyadh prices were up just over 1 percent year-on-year at SAR5,615 per square metre. Dammam rose 1.8 percent and Khobar rose just over 3 percent, while in Jeddah there was a 3 percent contraction to SAR5,411 per square metre.

Prices were falling in Jeddah because of a glut of major housing projects due to come on the market, Alsharif said. 

“Many potential buyers are adopting a wait-and-see approach since there are so many projects, especially in north Jeddah,” he said.

Ongoing projects in the Red Sea city include Marafy and Alarous by Roshn, Sadayem by the National Housing Project and residential elements of Jeddah Economic City and Jeddah Central. 

Although the economic slowdown has put a squeeze on housing affordability for ordinary Saudis, the government is already close to its target of 70 percent ownership among Saudi nationals, offering a range of easy financing options.