JLL releases report highlighting trends in Saudi Arabia’s real estate sector
Advisory firm, JLL, released its annual review KSA Real Estate Market for 2015, which assessing the latest trends in the office, residential, retail and hotel sectors.
The report highlighted the Riyadh market maintaining steady performance, while Jeddah showed continued growth momentum.
Jamil Ghaznawi, national director and country head of JLL Saudi Arabia said: “We have witnessed a shifting demand in the residential market in both Riyadh and Jeddah, as the trend moves towards property rentals from sales. Residential transactions declined by 5% in the Year-to-November 2015 compared to the same period in the previous year. We expect rental demand to continue in 2016 but at a slower rate in comparison to 2015, while little or no change is likely in the sales market in 2016.”
That being said Ghaznawi admits that the situation may change once the regulations surrounding the white land tax are released.
“Lower oil prices have put pressure on economic growth, liquidity, government budgets, the stock market and asset prices. This scenario has led to cuts in subsidies and reduced government spending and has also impacted the financing of real estate projects. A more selective approach can be seen, with an increased focus on critical infrastructure and affordable housing projects. On the other hand, there is reduced spending on less urgent projects, resulting in delays or scaling back of many projects.”
Looking into 2016 and beyond, Ghaznawi said that this period might be challenging as oil touches new lows and the government cuts spending and subsidies. “It is encouraging to see that the government is taking steps to diversify the Saudi economy. Such structural initiatives will have long term benefits and will contribute towards the positive development of the Saudi real estate market. Moreover, new laws allowing full foreign ownership of wholesale and retail business will attract foreign investment, which will ultimately benefit the real estate market. And finally, religious tourism will remain a growth sector in Jeddah and the Western region, and could support new hospitality supply.”