Saudi Arabia’s resilient residential mortgage market is likely to maintain momentum following the the recent move by the government to exempt property deals from 15 per cent value-added tax (VAT) and instead impose a new 5 per cent tax on transactions, according to real estate expert JLL.
In another move expected to encourage first time home buyers and support the Vision 2030 goal of increasing homeownership to 60% by the end of 2020 and 70% by the end of 2030,
the government has also scrapped the tax from first-time home-buyers of properties worth up to SR1 million ($266,401), said JLL in its Q3 KSA real estate market performance report.
The third quarter showed strong construction activity in the residential market, with around 10,000 units handed over in Riyadh and Jeddah. This brings the total residential supply to 1.3 million and 834,000 in Riyadh and Jeddah respectively, it added.
In terms of performance, JLL pointed out that residential sale prices in Riyadh registered an annual increase of 2% for apartments and villas.
The positive performance was supported by the various mortgage products; H1 2020 registered a 50% growth in the number of loans and a 49% growth in loan values compared to the same period last year, said the expert citing a SAMA report.
By contrast, rental rates registered annual declines of 1% for apartments and villas.
On the other hand, the overall performance of the residential market in Jeddah remained subdued in Q3 2020 as sale prices and rental rates declined 6% and 5% respectively, it stated.
“In addition to the positivity injected by the recent government measures, the residential sector also showed strong construction activity in Q3 2020 with around 10,000 units handed over in Riyadh and Jeddah,” remarked Dana Salbak, the head of research for JLL Mena.
“This brings the total residential supply to 1.3 million and 834,000 in Riyadh and Jeddah respectively,” stated Salbak.
“Looking ahead, residential rental rates in the Kingdom are expected to remain under pressure in the short-to-medium term, namely on the back of wider macroeconomic factors such as the growth in unemployment rates, and consequent contraction in household incomes,” she noted.
On the office sector, JLL said it continued to see downward pressure across Saudi Arabia, with Riyadh, the commercial hub, continuing to perform better.
That said, the third quarter of 2020 saw the highest number of office space deliveries in the year, with four projects added to the office stock in Riyadh, bringing the total supply of office GLA to 4.4 million sq m.
Meanwhile, the Saudi retail market saw mall operators and owners continue to retain their tenants and maintain their quarterly average rental rates through incentives such as rent free periods and temporary discounts.
In the short term, it is expected to remain under pressure as more supply enters the market, thus, intensifying competition, it added.
The editorial staff of Saudi Arabia Today would like to give all of its readers from Gulf and Saudi Arabia and the whole world the opportunity to participate actively in the development of the website! If you have something interesting, fun, scandalous - just something worth to be seen from more people. Capture it and share it in the Saudi Arabia Today with a short text.
Do you have information you want to reach our readers?
The Arab states of the Persian Gulf are the seven Arab states which border the Persian Gulf, namely Bahrain, Iraq, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE).This excludes the non-Arab state of Iran. All of these nations except Iraq are part of the Gulf Cooperation Council (GCC).