The report indicates that residential property transactions decreased by 16%, with a total transaction volume of around 150,000 units. Meanwhile, overall real estate transactions also decreased by 17%, with the total value dropping to 197.7 billion Saudi riyals.
The analysis in the report suggests that the decline in residential sales is a direct result of high property prices and rising interest rates. Data shows that interest rates increased from 0.8% in early 2021 to 6% last year, posing a greater burden on homebuyers.
Over the past two to three years, residential prices in Saudi Arabia have witnessed remarkable growth, with Riyadh's housing prices reaching historic highs. In 2023, apartment prices in Riyadh increased by 4.5% year-on-year, while villa prices rose by 0.5%. However, prices in other cities showed a downward trend.
The report mentions that despite Riyadh's status as the economic hub of Saudi Arabia, attracting numerous international companies to establish regional headquarters and providing many job opportunities, rapid population growth is expected to result in a housing shortage of up to 1.5 million units in Riyadh. Although authorities plan to deliver 241,000 housing units by 2030, demand still far exceeds supply.
The report also notes that while Riyadh saw a 7% increase in property transactions last year, transaction volumes in Jeddah and Dammam declined by 21% and 12%, respectively. This indicates an imbalance in real estate market development among different cities.
Furthermore, the number of mortgage loans in 2023 saw a significant decrease. From January to November, the number of mortgage loans decreased by 35%, totaling 74.2 billion Saudi riyals. This may be attributed to concerns among homebuyers about high interest rates and the impact of rising property prices.
For investors, the results of this report serve as a reminder to carefully assess the risks and opportunities in the Saudi Arabian real estate market. While high property prices and interest rate increases may pressure homebuyers, they may also present opportunities for investors. Investors need to closely monitor market dynamics, understand the differences among different cities, and consider the potential long-term returns on investment.
