Market Trends of Saudi Arabia Luxury Residential Real Estate Industry
Demand for Apartments remains High due to Cultural Preferences in Saudi Arabia
Apartment sales and rental rates are under pressure due to economic slowdown and taxes such as the ex-pat dependent levy. Moreover, the demand for apartments is lower than for villas. However, the popularity of apartments is increasing relative to previous years in Saudi Arabia as a higher number of new developments are introducing apartments. The multi-dwelling model allows for more revenue generation potential and can quickly transform into a rental model if the sale absorption is not fast enough.
New apartment developments with modern fixtures, fittings, and private basement parking are still considered future investments. Unlike villas, existing apartments in the eastern and central parts of Saudi are more attractive in terms of location due to their proximity to the central business district of Riyadh. The eastern part's land availability is relatively higher than the main areas.
For new apartment developments, central areas are still fetching the city's highest sale price, varying from SAR 3,000 (USD 797.94) to SAR 4,700 (USD 1,250.11) per sq m. The apartment sale prices on the northern side ranged from SAR 2,000 (USD 531.96) to SAR 4,300 (USD 1,143.72) per sq m. Apartments in the south achieved prices between SAR 1,500 (USD 398.97) and SAR 4,000 (USD 1,063.93) per sq m. In the eastern part of Riyadh, sale prices range between SAR 1,500 (USD 398.97)and SAR 3,600 (USD 957.53) per sq m. In the western part of Riyadh, apartments have been observed to vary from SAR 1,500 (USD 398.97) to SAR 3,000 (USD 797.94) per sq m.
Riyadh is Witnessing Significant Growth in the Luxury Residential Market
Riyadh is the capital and the largest city of Saudi Arabia, with a total population of 6.5 million, whereas the population of Riyadh province is around 8 million. Its location along the center of the Arabian Peninsula, coupled with increasing economic activities, makes it a preferred business destination for Saudis and non-Saudis who live and/or work in the city.
Sale prices and rental rates of villas have declined during 2021. The trend was first noticed after implementing the white land tax, which led to cautious behavior from investors and end-users, resulting in many drop-in activities in the sector.
Based on industry experts, the northern and central areas of the city, such as Al Ghadeer, Al Nada, Al Malga, and Al Wurud, districts command the highest rental rates in Riyadh. The average rental rates of villas vary between SAR 70,000 (USD 18,618.70) and SAR 205,000 (USD 54,526.21) per annum on the northern, central, and western sides. The average rentals range between SAR 44,000 (USD) and SAR 155,000 (USD) per annum in the eastern and southern parts of the city.
For new villa developments, the sale price of villas located in the central part of Riyadh ranged between SAR 4,000 (USD 11,703.19) and SAR 6,500 (USD 1,728.88) per sq m. The villas' sale prices on the northern side went from SAR 2,300 (USD 611.76) to SAR 5,500 (USD 1,462.90) per sq m.
Villas in the south reached prices between SAR 1,800 (USD 478.77) and SAR 3,500 (USD 930.94) per sq m. In the eastern part of Riyadh, sale prices ranged between SAR 2,000 (USD 531.69) and SAR 4,500 (USD 1,196.30) per sq m. In western Riyadh, villa prices vary from SAR 2,000 (USD 531.69) to SAR 4,000 (USD 1,063.38) per sq m.
Most of the new supply is focused toward the city's north and east, while the center is saturated with various developments. Vacant land parcels are becoming more scarce.
