Saudi property market grows despite flurry of new units

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• Riyadh and Jeddah gain 27,500 units
• Residential sale prices jump 10%
• Supply of office space rises

The delivery of thousands of new residential units in Riyadh and Jeddah in the first half of the year failed to dent continued growth in Saudi property values and rents.

A combined 27,500 units came onto the market from January to June in Saudi Arabia’s two largest cities, bringing the total residential stock to about 1.5 million units in the capital and to 891,000 in Jeddah, a new report from the real estate consultancy JLL said.

Despite this, residential sales prices jumped 10 percent over a year in Riyadh, with rents growing by 9 percent. In Jeddah, prices were up 5 percent and rents up 4 percent over the first half of 2023, the report said.

Another 16,000 more units are slated for delivery in each city before the end of the year.  

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The residential construction industry outlook, however, has become more uncertain amid increased competition for land, local “capacity constraints,” “volatile” costs caused by “global economic headwinds” and rising shipping costs, among other factors.

“As a result, we are seeing that in parts of the market, the scheduled delivery schedules are slipping, which in turn is impacting potential transactional activity as owner-occupiers and investors approach a wait-and-see approach,” JLL said in the report. 

Grade A rent rise

The supply of office space in Riyadh was also on the rise, with 52,000 sq m coming to market in the first half of the year to make a total stock of 5.2 million sq m.

Average rents for Grade A space jumped 19 percent year-on-year nevertheless, driven primarily by demand from government-related entities. 

An additional 249,000 sq m  of office space is expected in the capital in the second half of the year, with 48,000 sq m slated for delivery in Jeddah, where there was no new supply in the first six months of 2024.

JLL, commenting on the Saudi property market, said: “Strong levels of pre-leasing on upcoming institutional quality developments, combined with a significant level of pent-up demand in the market, particularly from incumbents looking to upgrade their office space, will continue to underpin rental and occupancy growth.”