House prices in Saudi Arabia’s biggest cities continued to decline in the three months to the end of June, as falling oil revenue continued to put pressure on the kingdom’s economy.
For the longer term, the property broker JLL’s outlook was that the market should rebound if the country’s economic transformation plan works out.
JLL’s data showed that villa prices in the Saudi capital Riyadh stood 5 per cent lower during the second quarter than they were during the same period a year ago, while apartment prices were 1 per cent lower.
In Jeddah, the kingdom’s second city, year-on-year villa prices were down by about 4 per cent and apartment prices fell by 5 per cent.
The number of housing transactions also fell by 5 per cent during the quarter, JLL said.
Housing rents in Riyadh fell by about 1 per cent year on year. But in under-supplied Jeddah rents continued to rise as projects that had been expected to enter the market were delayed.
JLL said the two-year slump in global oil prices had caused “a slowdown in performance”, which was expected to continue for the rest of this year. The news came as global oil prices suffered their worst monthly falls this month since last year. Brent crude fell to US$42.46 a barrel on Friday, 14.5 per cent lower than at the start of the month.
According to official Saudi figures, oil accounts for 42 per cent of the country’s GDP.
Office rents in Riyadh and Jeddah also fell slightly. JLL said average office rents in Jeddah sank by 1.5 per cent compared with a year earlier to 1,123 Saudi riyals (Dh1,099) per square metre. The property broker reported a similar decline in Riyadh.
“The continuing slump in residential transactions shows the pace of demand growth is certainly now slowing,” said Jamil Ghaznawi, the head of JLL’s Saudi office.
“Even though there is mounting strain on both markets currently, the markets are likely to recover in the foreseeable future as the Saudi government ambitiously takes new initiatives to stimulate the country,” he said.
The government’s National Transformation Plan, announced on April 25, includes a target to double the contribution of the property industry to the country’s GDP to 10 per cent, as part of a wider plan to reduce Saudi Arabia’s dependence on oil.
Official targets include plans to make it cheaper for Saudi nationals to buy their own homes by building more houses and providing grants and more easily accessible mortgages. Knight Frank estimates that 30 per cent of Saudis own homes compared with a global average of 70 per cent.
The plan also includes measures to encourage economic diversification by allowing foreign companies to enter and invest in the kingdom.
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