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Rent in Saudi skyrockets as developers fall behind

Rent in Saudi skyrockets as developers fall behind

Supply-demand mismatch in Saudi may cause you to pay even more rent for your house and office space. Banque Saudi Fransi’s John Sfakianakis gives us an overview

May 10, 2011 5:20 by

Even after these gains, Area C is still the least-expensive part of North Riyadh, where the average asking price of villas in area A, including such districts as Al-Nakheel and Khozama, is SR1.93 million. That is up 37.3 percent in the past year and the most expensive rate in Riyadh, second only to north Jeddah for the priciest villas in the country.

The Saudi capital is home to around a quarter of the Saudi population and serves as the Kingdom’s financial and business capital. Gauging real estate price shifts in Riyadh is therefore a crucial benchmark for assessing the dynamics and health of the country’s property sector. The average small villa cost SR1.34 million in Riyadh in H1, up 11.5 percent from H2, while large villas (400-700 sq m) rose in price by an average 8 percent to SR1.83 million, data show.

Apart from the north, East Riyadh, where accommodation costs are more expensive than the south and west, posted the biggest jump in villa prices across Saudi Arabia since H2. Small villa prices rose 30 percent to an average advertised rate of SR1.24 million in the east’s 11 neighborhoods, including Al-Andalos and Al-Manar. Large villa asking prices were up 17.2 percent to SR1.97 million. By comparison, small villas cost an average of SR725,000 and SR695,000 in west and south Riyadh, respectively, both marking more moderate gains of around 9 percent on the year.

The appeal of East Riyadh stems from the fact that its neighborhoods offer good quality at a lower price than the north. Affordability is a key challenge for the Kingdom as the vast majority of the population does not earn enough to afford costly detached units.


Apartment prices were more restrained in the capital. Large apartments (135-190 sq m) climbed an average of 3.8 percent in Riyadh to SR560,833 compared with H2, while their cost was up 7.5 percent from a year ago. East Riyadh, again, showed the steepest rise, with apartment prices there climbing 15.1 percent from H1, 2010 to SR502,667 on average. The cost of a large apartment varies from as low as SR380,000 in south Riyadh to almost double that in parts of the north. Smaller apartment (120-135 sq m) prices in Riyadh were up 1.6 percent from H2 at an average SR428,334, the survey showed.

The slower momentum in apartment prices reflects citizens’ preferences for villas. A demographic survey conducted in 2007 showed that only one-third of Saudis living in apartments own their flats, compared with ownership ratios of 85 percent for villas.


Small villa prices in Jeddah, which had fallen on the heels of mass floods at the end of 2009, have returned to 2008 levels, but apartments are still slightly cheaper than they were two years ago. Property price rises were not as marked in H1 in Jeddah as they were in Riyadh.

Real estate in Jeddah, located on the coast of the Red Sea in Western Saudi Arabia, is among the most-costly in the country. As the second-largest Saudi city, Jeddah hosts the Kingdom’s main port, acts as an important commercial center and, due to its proximity to the holy cities of Makkah and Madinah, as a gateway for religious tourism.

The average price rise of a smaller Jeddah villa (300-400 sq m) was 6 percent in H1 from H2, 2010 to SR1.71 million. Villas in upscale north Jeddah are the most expensive in the country, averaging SR2.63 million in H1, up nearly 11 percent year on year. Large villas in the same area cost an average of SR3.6 million, up 3.9 percent on the year, the data show. Elsewhere in Jeddah, going rates for large villas in the south jumped 14.9 percent in H1 compared with the previous period to SR1.28 million, while smaller villas cost SR916,667 there, reflecting a more modest 1.9 percent gain. Small villas in central Jeddah, which had shed the most value after the floods, have risen 21.5 percent in the past year to an average SR1.6 million.

Average Jeddah apartment prices also gained moderately, reaching SR783,333 for a large apartment in the north – the highest price in the Kingdom, marking a rise of 1.7 percent from H2. On average for the city, apartment prices were up 1.5 percent from H2 to SR622,778. Smaller Jeddah apartments rose an average of 2.1 percent in all districts from H2 to SR501,111, also the most expensive in the country.


The gap between house prices in Alkhobar and neighboring Dammam and Dhahran in the Eastern Province widened in H1 as the former saw sharp rises in advertised villa and apartment prices. Smaller villas in Alkhobar, the province’s commercial hub, rose 12.8 percent from H2 levels to an average asking price of SR1.33 million, while larger villas advanced in price by 15.4 percent to SR2.19 million. By contrast, in Dhahran, headquarters of oil giant Saudi Aramco, villa prices fell 1.3 percent for smaller villas to SR758,333 and rose 6.7 percent to SR1.07 million for larger villas, on average.

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