Report: Strong demand fuels Jeddah's 'robust' property market

JLL's Jeddah Real Estate Market Overview for Q3 2011 said the city's residential sector had seen a "robust upward trend" as average prices and rentals continued to increase between July and September.

"The Jeddah market has seen a continued increase in land sales during 2011 as trading volumes and sale prices have picked up further during the last quarter,' said Soraka Al-Khatib, Co-Head of Jones Lang LaSalle Saudi Arabia. 'There is strong interest from developers to deliver additional residential supply to meet the city's growing requirements."

The strength of the Jeddah real estate market is evidenced by the fact that most of the 16,000 units coming to the market over the remainder of 2011 have already been sold.

"The limited future supply pipeline and the city's growing population are expected to drive prices and sustain demand throughout the remainder of 2011 and into 2012," Al-Khatib said. "Major investment in infrastructure, transport, health and education sectors will further reinforce Jeddah's market position."

The King's announcement of additional funding for the affordable housing sector has had a positive impact on the Jeddah residential market, with government related entities such as JDRUC and PPA now planning to deliver more than 30,000 additional residential units across Jeddah over the next few years, the report noted.

There is also strong continued interest in the luxury segment of Jeddah's residential market, particularly along the city's Corniche area. This trend is further illustrated by the announcement of the Al Jawarah and Kingdom Tower projects. Due to be delivered in 2013 and 2016 respectively, these two projects will provide the first branded residences for sale in the Jeddah market, the report said.

Average villa sale prices across the north and eastern districts of Jeddah increased, the report said, while the prices of villas in the western area remained stable for the third quarter. The average sale price for a three-bedroom villa in Jeddah was recorded at SR4,100 ($1,093) a square metre for the third quarter of 2011.

The sale prices of apartments increased across all districts in Jeddah during the third quarter, with the average sale price for apartments at SR2,800 a sq m.

Increase in rental rates

On the rental side, rents for villas increased by 10% year-on-year, with costliest rents being in the Rowda, Shatea and Basteen areas. The average rental price for a three-bedroom villa in Jeddah for the third quarter of 2011 was SR123,000 a year.

Rental rates of apartments in Jeddah have recorded an even larger growth, with average rates rising by 14% year-on-year. Rental rates may increase further if prospective plans for housing allowances for government sector employees are implemented, the report noted. The average rental rate for a two-bedroom apartment in Jeddah was SR32,800 a year.

Commenting on the report, Craig Plumb, Head of Research at Jones Lang LaSalle MENA said: "The SR500m economic stimulus package announced earlier in 2011 has sustained the Jeddah real estate market during 2011. With Saudi Arabia's oil output having been boosted to offset lower supply from other MENA producers and oil prices remaining relatively stable over recent months, there is likely to be increased investment in the infrastructure and real estate sectors of the economy over the next 12 months.

The residential sector is likely to remain the 'hot spot' during 2012, with further opportunities to create more affordable housing products. Moreover, continued growth in real estate financing and private sector lending will give a further boost to the overall real estate industry."