Transactions in Saudi’s residential property sector take a hit

Real estate consultancy CBRE has released its end-of-year macro environment analysis of Saudi Arabia’s residential property market, finding that while the total number of transactions dropped significantly, transaction value remained relatively stable due to markedly higher residential property prices.

During 2022, the total number of residential transactions in Saudi Arabia ended the year at 175,067, a drop of 25% compared to the year previous. Transactions fell across the three major regions, with volumes in Riyadh, Jeddah and the Dammam Metropolitan Area down 33.9%, 16.2% and 20.9% respectively.

Taimur Khan, Head of Research for MENA at CBRE, said that the fall in deals had to do with two main effects: lower purchasing appetite from households due to economic uncertainty and higher interest rates, and less investment hunger from institutional investors as they sought to rebalance their portfolios and spending.

“Given this marked decline in transaction volumes, it is unsurprising we have also seen a decline in the number of mortgage contracts issued by banks. Year-on-year in 2022 the total number of mortgages issued fell by 23.4% to 154,392. The total value of these contracts amounted to SAR 120.23 billion,” said Khan.

“As for the share of new loans issued among property types, single-family houses remained the most dominant, accounting for a 67.6% of the total, while apartment and land mortgages accounted for 27.5% and 4.5% respectively.”

However, despite these developments, the total value of all residential transactions in 2022 stood according to CBRE at SAR 126.5 billon, which is ‘just’ 3.7% lower than the year previous.

This can be explained by the higher average value per transaction. For example, “average villa prices in Riyadh, Jeddah and Dammam increased by 6.2%, 6.7% and 17.4% in 2022,” explained Khan. Khobar was the only major city to record a decline in average villa prices over this period, with prices falling by 4.4%.

Meanwhile, in Riyadh, the increase in the transaction value for apartments was a massive 17.4%, in stark contrast to Jeddah, Dammam and Khobar, where apartment transaction prices contracted.

Looking ahead, Kahn said that 2023 points at a year of more balanced growth in the residential transactions scene, with a major stock of affordable property expected to increase activity levels, and cushion the uplifting impact of deals in the high-end housing segment.