Riyadh, 27th August 2024: Residential transactions, which accounted for 61% of all real estate deals by total value, registered a 41% increase in the number of deals to just under 91,860 sales during H1 2024, totalling SAR 77.6bn compared to the same period last year, according to global property consultancy Knight Frank’s Saudi Arabia Residential Market Review Summer 2024 report.
The total number of real estate transaction volumes across all asset classes in Saudi Arabia surged by 38% in H1 2024 to just over 106,700, while the total value of all deals increased by 50% to SAR 127.3bn, Knight Frank says.
Faisal Durrani, Partner – Head of Research, MENA, explained: “The residential market in the Kingdom has experienced a phenomenal transactional surge during the first half of 2024, with double digit growth in sales volumes in four major Saudi cities – Riyadh, Jeddah, DMA and Madinah. Government initiatives aimed at achieving 70% homeownership by the end of the decade, bolstered by Dhamanat, the Kingdom’s mortgage guarantee scheme, have been instrumental in driving up sales activity this year.
“For instance, in 2023, over 96,000 families benefited from the Kingdom’s Housing Program which helps to facilitate access to affordable home financing solutions. In addition, more than 20,000 families were assisted through homeownership tracks via the Development Housing Program. And in a major policy shift, during July the government launched the first Dhamanat for off-plan sales, licensed by the Insurance Authority, which is expected to pave the way for access to projects still being developed.”.
Knight Frank says the total number of mortgages issued between January-May 2024 increased by 6.7%, compared to a decline of -35% over the same period last year.
Similarly, the total value of mortgages issued grew by 3.9% translating into SAR 36.2bn during the same period. The Saudi Central Bank has also played a significant role in stimulating this growth by reducing the minimum down payment required for property purchases from 30% to 5%.
Transaction volumes in Riyadh
Riyadh continues to stand out among Saudi Arabia’s major cities. Indeed, over the last 12 months, residential transaction volumes in the capital rose by 49%, compared to 27% in Jeddah, 29% in DMA, and 21% in Madinah. Makkah was the only city where transaction volumes declined by 6%.
Talal Raqaban, Partner – Valuation, PPP and Deal Advisory, Saudi Arabia, said: “Despite the surge in transaction volumes, the total value of residential transactions in Riyadh rose by a more modest rate of 8% year-on-year to SAR 14.3bn, hinting at a rapid tapering of the strong price growth registered over the last two to three years and pointing to affordability challenges in some segments of the market.
“To expedite the construction of new homes, and in an effort to address a longstanding shortage of suitable high-quality supply, The Ministry of Housing, together with private sector developers have completed several projects in the first half of 2024, adding approximately 5,000 residential units to the market. Notable among these are the Ishraq Living Complex (2,229 units), and Nesaj Town (690 units).”.
Holy Cities residential real estate appeal
Knight Frank’s analysis also reveals an exceptional rise in transactional value in Makkah’s residential market. The value of residential transactions registered across Makkah saw a staggering increase of 79%, equating to 1,426 deals at SAR 2.3bn.
Average apartment prices in Makkah grew marginally by 1.5% during first half of 2024 to SAR 3,695 psm while villa prices registered a marginal decrease of -2.5% over the same period of time.
Echoing Makkah, Madinah apartment sales prices rose by 5.2% from last year’s average of SAR 3,555 psm to SAR 3,730 psm in Q2 2024. Similarly, villa sales prices have experienced a downward trend declining by 2.5%.
In case of the volume and value of residential transactions, unlike Makkah, Madinah’s residential volumes increased sharply by 21%, with a total of 1,397 deals. However, the total transaction value saw a slight decrease of 5%, year-on-year, to SAR 1bn.
Amar Hussain, Associate Partner – Research, ME, added: “Historically, ownership laws in either of Islam’s holiest cities restricted purchases to just Saudi nationals and long-term expats. The new Premium Residency Visa connected to property ownership, announced in January, is however a welcome move. It allows for the first time the opportunity for international, non-residents to purchase property in the Holy Cities on a 99-year leasehold basis.
The threshold of SAR 4 million appears to have been set to ensure that the investments are significant. This will likely lead to an influx of high-value transactions in the real estate market. This change could also potentially increase the demand for luxury and high-end residential properties, driving up property values in these segments over the medium-term”.
Knight Frank says that the only two Giga projects in the Holy Cities – Thakher and Masar Makkah – with c.10,000 homes set to be delivered in these developments, will account for just 1.5-2% of the total 660,000 units planned nationally, which highlights the opportunity to add more luxury housing in Makkah and Madinah.
In Knight Frank’s 2024 Destination Saudi Report, the consultancy was able to quantify, for the first time, the depth of demand to own real estate in Saudi Arabia’s Holy Cities from global Muslim HNWI. 84% of those interested in making a residential property purchase in the Kingdom would like to make that purchase in one of the Holy Cities.
Breaking that down further, 40% would be interested in purchasing a property in Makkah, 19% would prefer to secure a home in Madinah, and 26% have no specific preference between the two. Of those looking for a main residence in Saudi, 58% would prefer Makkah, compared to 20% for Madinah.
