The buoyancy in the economy coupled with a growing population has increased consumer confidence in Jeddah's residential property market, Colliers International said in its fourth quarter of 2011 Jeddah residential report. However, the majority of the growth is concentrated in the upper-mid to high-end segments of the market which has contributed to the high sales prices that are being achieved in a number of recent projects, the report said. The new residential supply is mostly concentrated in east Jeddah along the Al-Haramain Expressway within districts such as Manar, Al Marwa and Al Safa. Most of the new supply is in the form of multi-family dwellings rather than single-family dwellings. This shift from single-family dwellings can be attributed to sharp increases (20 percent-30 percent) in land prices experienced over the past year and the impact this will have on the affordability of the product. The way in which Jeddah developed over the years, the infrastructure in the older parts of the city, such as the Corniche, Al Balad etc. is no longer up to current standards of development. For this reason, namely the improved and better infrastructure, most of the city's upper-mid and high-end housing supply can be found in north Jeddah. The residential sector in Jeddah has nevertheless been a challenge to the Jeddah Municipality and the Jeddah Development and Urban Regeneration Company (JDURC). Approximately one-third of the city's population is currently housed in informal settlements and the municipality wishes to re-house these people in decent but affordable accommodation. The aim is to create additional housing through the regeneration of central districts of Jeddah such as Al Ruwais, Al Balad and Qasr Khozam. This will revive and modernize these areas whilst preserving a wealth of historical buildings and structures. As the regeneration programs proceed, residents of informal settlements are to be re-housed in these mixed use neighborhoods. Colliers research indicates that the average sales price for multi-family dwellings located predominantly toward the east along the Al-Haramain expressway, range between SR2,650/m2 and SR3,200/m2. Prices in newer projects will be measurably higher than those in earlier projects mainly because of the increase in land cost. In recently completed projects the cost of the land has comprised as much as 50-60 percent of the overall development cost. Moreover, the newer supply of low to mid-end apartments was developed mostly by smallsized developers in districts with limited infrastructure development. High-end apartments in the city centre sell at prices of approximately SR3,900/m2. Apartments in high-rise water-front developments are becoming more popular with highincome households. There are a number of towers currently under construction which include Lamar, Masarat, Diyar Al Bahr and Al Mada Towers. The average sales prices for these ultra deluxe apartments range from SR12,000/m2 up to SR22,000/m2. Central Jeddah has a very limited supply of single family dwellings such as villas and duplexes. There are a few developments of this nature in areas such as Al Marjan and Basateen in north Jeddah but the highest concentration will be found around Obhur Creek. Selling prices for villas range from SR2,800/m2 to SR4,500/m2 depending on location and quality proposition. A recent, new supply of villas close to the Corniche has been achieving average selling prices of SR5,450/m2 and which appear to be the highest villa prices in Jeddah. Until now buyers have shown a definite preference for residential developments in and around the city center over developments further away from the city. There is however expected to be a shift in sentiment with the completion of new residential communities targeted specifically at Jeddah's mid-income households, such as Al Fareeda by Ewaan and Mashraf by Kinan. Given the preference displayed by investors for properties located in and around the city center as opposed to developments situated in the periphery of the city, it is felt that there are currently unexploited development opportunities in partnership with bodies such as the JDURC or the Ministry of Housing. There are a number of land parcels in areas such as Wadi Al Asla, Al Ruwais, Al Balad, the Old Airport and Qasr Khozam located in close proximity to the city center which would be suitable for the development of moderately priced residential units. Alternatively, community-led housing developments similar to the Al Fareeda Community in Dhahban and the Masharef Community in Asfan are attractive options for developments located closer to the outskirts of the city. It is important, though, that social infrastructure elements such as schools, healthcare, recreational facilities and convenience retail be included in or close to such developments to enhance the attractiveness of the development to investors. The absence of these elements from such developments will detract from the appeal that such developments would otherwise have to prospective investors. Currently, Jeddah's residential stock is estimated at more than 730,000 residential units. Most of the new stock in the market is targeted at mid- to high-income households at prices well beyond the financial reach of the majority of Jeddah's households. This underscores the urgent need for appropriate mortgage schemes that will enable prospective buyers to build or buy homes. Present market conditions such as high land prices, rising construction costs, and delays in implementing the mortgage law seriously curb the delivery of a number of developments meant to cater to the housing needs of low to mid-income households. As the city's urban boundaries expand beyond Obhur Creek, land and unit prices closer to the city centre are expected to continue to increase. This further emphasizes the importance of upcoming projects such as Kingdom City and other residential developments envisioned in Rabigh, Thuwal and Dhahban. The rail track connecting Madina with Makkah through Jeddah will shorten the travel time between central and north Jeddah. This connectivity will enhance demand in northern Jeddah which will in turn drive supply in the near future. However, current price levels of existing residential offerings in northern Jeddah districts including Bandar and Al Shata'a Al Dhahabi are deemed inappropriate by many of Jeddah's homebuyers because of the lack of social infrastructure in the form of healthcare, educational and recreational facilities in these areas.
