Saudi Arabia’s Riyadh, a city of 6.5 million people, is facing high shortage of middle income housing, property consultancy Chestertons has revealed.
The consultancy says that there is an increasing demand for affordable housing, as the city’s population growth continues to outstrip property market supply.
Over the past 15 years, population in the capital has grown by a whopping 52 per cent. But only 500,000 housing units have been built during the same period. This has resulted in a dearth of low cost housing across the largest city in the kingdom, the consultancy says in its Riyadh Real Estate Market Overview for Q2.
“The Saudi government is all too aware of the acute shortage in low cost housing units, but continuing low oil prices have resulted in inevitable cuts in public spending, which has in turn hit public housing projects,” says Declan McNaughton, Managing Director UAE, Chestertons MENA.
“So far the impact on rental rates has been minimal, but it is beginning to drive prices higher in some areas that have traditionally provided value-led accommodation for budget conscious tenants,” he added.
Average annual rental rates for apartments and villas in Riyadh are currently SAR26,935 and SAR118, 668 respectively.
The average sales price of apartment is SAR441,656 while villas come at an average price of SAR1,787,926.
“Sales have slowed however, the move by the Saudi Arabian Monetary Agency (SAMA) to adjust the loan-to-value ratio for mortgages could help reinvigorate the market, particularly for those who had previously struggled finding the necessary funding,” said McNaughton.
“Furthermore, as the market begins to bottom out we anticipate renewed interest from buyers who have been waiting for the optimum time to purchase,” he added.