Housing rents fall in Saudi Arabia on expat departures, economic reforms - analysts

News Saudi Arabia

Housing rents fall in Saudi Arabia on expat departures, economic reforms - analysts

The kingdom has introduced a series of economic reforms aimed at raising revenues, ranging from subsidy cuts to introducing a value-added tax at a 5 percent rate in January 2018.

Fadaak said the prices of apartments, which are the residential category most popular among expats, was “the most affected by a continuous, over one year- drop of up to 1.8 percent , while the standalone houses (that are more popular among the locals) fell by 1.6 percent,” citing figures from the housing ministry report issued in April.

Recovery path

BMI Research’s Auberty said that although there are indications of a recovery of consumer confidence in the Saudi real estate market, many residents, including locals, will remain reluctant to buy “expensive properties, and would rather focus on more affordable housing… as they do not expect (economic) growth to return to previous highs”.

Saudi Arabia’s gross domestic product (GDP), adjusted for inflation, grew 1.2 percent in the first three months of the year, Reuters reported this month, citing data from the government's statistics agency. The kingdom’s GDP shrank 0.7 percent in 2017, a huge drop from previous growth rates in the 4 percent range scored in 2013 and early 2014 before the oil crisis hit.

JLL’s Riyadh report said that the number of apartments sold in Riyadh in the second quarter of 2018 decreased by 16 percent compared to the second quarter of last year. It said the number of villas sold also declined by 17 percent for the same period.

As for Jeddah, the sale prices of apartments and villas have fallen by 4.3 percent and 2.9 percent respectively over the past quarter, and by 8.5 percent and 5.6 percent respectively over the past year.

Fadaak said the Saudi Arabian government’s economic reform moves are meant to “tackle the defects in the economy” such as high unemployment rates.

He said the number of unemployed Saudi residents - which includes both the locals and expats- was 847,480 - 778,937 of whom were Saudi citizens and 68,543 non-Saudi citizens - by the end of the first quarter of 2018, compared to 775,994 - 722,910 Saudis and 53,084 non-Saudi citizens - in the first quarter of last year, citing figures from the kingdom’s General Authority for Statistics that were also seen by Zawya.