Saudi Real Estate Market Remains 'Resilient'

While COVID-19 has curtailed real estate activity in the market, market performance has – in most parts – remained resilient, the Saudi Arabia Real Estate Market Review Q4 2020 released by real estate consultant Knight Frank Middle East has shown.

BY Realty Plus
Published - Saturday, 30 Jan, 2021

Saudi Real Estate Market Remains 'Resilient'

While COVID-19 has curtailed real estate activity in the market, market performance has – in most parts – remained resilient, the Saudi Arabia Real Estate Market Review Q4 2020 released by real estate consultant Knight Frank Middle East has shown. Saudi Arabia’s Purchasing Managers’ Index (PMI), which tracks the country’s private non-oil economy, indicates that both economic activity and business conditions are improving and Saudi Arabia’s economy may yet finish the year in a stronger position than expected. In terms of the kingdom’s office market, Saudi Arabia’s Ministry of Investment granted 812 foreign investment licences during the first nine months of 2020, compared to 840 licences during the same period a year earlier. Riyadh’s office market performance continued to soften in the year to Q4 2020, with Grade A rents falling marginally by 0.7% to $386.6 (SAR1,450) per square metre whilst Grade B rents declined by 2.9% to $729.6 (SAR745) per square metre. The vacancy rate for Grade A office space increased by one percentage point from Q4 2019 to reach 7% in Q4 2020, whilst the Grade B vacancy rate increased by three percentage points to reach 31% over the same period. Rental performance in Jeddah’s office market remained subdued in the year to Q4 2020, where Grade A and Grade B rents fell by 4.2% and 8.0% respectively. On average, Grade A rents were recorded at $266.6 (SAR1,000) per square metre and Grade B rents at $183 (SAR688) per sq.m. The vacancy rate across Grade A office spaces increased by two percentage point from Q4 2019 to reach 16% in Q4 2020, whereas the Grade B vacancy rate increased by four percentage points to reach 30% over the same period. The Dammam Metropolitan Area’s (DMA) office market performance continued to soften in the year to Q4 2020, with Grade A rents falling by 4.8%, whilst Grade B rents declined by 8.6%. The recent decision to exempt real estate transactions from 15% VAT and the introduction of a lower property tax has helped to boost activity in the residential market. Riyadh’s residential market registered fragmented performances in the year to Q4 2020, with residential apartment sales prices increasing by 1.6% to an average of $884.4 (SAR3,317) per square metre, whilst residential villa prices decreased by 2.% to $986.5 (SAR3,700) per square metre over the same period. The total volume of residential transactions increased by 11%, whilst the total value of residential transactions declined by 6% in the year to Q4 2020. In Jeddah, in the year to Q4 2020 average residential apartment sales prices decreased by 2.0%. Average villa prices fell by 3.1% over the same period. Residential transaction volumes and values in Jeddah increased by 17% and 16% respectively in the year to Q4 2020, a trend driven by a notable increase in the uptake of mortgages provided by banks and financial institutions.