RIYADH: Saudi Arabia’s housing sector has recorded an 8 percent increase in apartment-linked mortgages in the 12 months to the end of May, as buyers look for more affordable options to own a house in the Kingdom, the latest report by global consultancy firm Knight Frank revealed.
While owning a villa remains the top goal among Saudis, apartments are fast emerging as a more realistic option from an affordability perspective, despite prices of such flats rising in key cities like Riyadh.
The figures show that the capital city’s average apartment prices went up by 10 percent from January to June.
With the cost of borrowing increasing, which jumped from 3 percent to 5 percent last year, buyers are seeing their purchasing power eroding, particularly in the villa segment, the report stated, adding that this led to the number of mortgages issued to such houses falling by 2 percent during the period.
However, the villa segment continues to lead the number of mortgages issued with 68 percent, followed by apartments which held 27 percent, with the remaining allocated to residential land plots.
With Riyadh witnessing a growing population that is expected to reach 15-20 million by 2030, the housing market in the city is likely to see increasing demand, especially for smaller homes, apartments and rental properties. This comes as the influx of domestic migrants and expatriates to the Saudi capital has started to create a different form of housing demand.
With the market continuing to see limited supply, the Ministry of Housing is providing more options to meet the growing demand for affordable homes and achieve the government’s 70 percent homeownership target by 2030.
In terms of villa prices in Jeddah, the port city saw a 1 percent growth during the second quarter of this year while average apartment prices increased by 2 percent during the same period.
The report noted that prices in the Dammam market were experiencing lopsided performance with the average apartment prices increasing by 5 percent during the second quarter of this year compared to the same period in 2022.
In contrast, villa prices decreased by 2 percent during the second quarter of this year compared to their prices in the same period in 2022.
The report added that the demand in Dammam is centered around apartments for ready-built units, with little to no transactions recorded in the second quarter of 2023 for villas.
The report pointed out that this reluctance to buy villas was due to affordability factors and the limited availability of villas.
