Khobar's rental market is displaying strong performance, at par with other major cities of the Kingdom, particularly within the apartment sub-market, Colliers International said in its Residential Overview of the area for the fourth quarter of 2011. Colliers envisages that the rental market will continue to perform strongly in the medium term until the implementation of the mortgage law. Sales of high end products, while still buoyant, appear to be slowing, which points to saturation levels being reached in the supply/ demand balance. Demand for products for low-income households nevertheless remains strong. While there are a variety of options in the freehold market for mid income households, their potential remains severely limited due to the limited availability of home financing Affordability is a prime issue among middle income households. Potential homeowners in Dammam and Al-Khobar have increasingly shifted toward home financing rather than cash purchase. Therefore, opportunity lies in developing sensibly priced units in master planned communities with strong alliances with home financiers. There is preference for quality apartment developments in Dammam and Al-Khobar. A fitting example would be the Al Hamraa District (also commonly known as Shobily High Rise) in Al-Khobar, which is a prime location for quality apartments. Most home buyers in the district believe in the investment potential of their purchases, particularly with the expected forthcoming completion of the Shobily Masterplan, which has been on hold for several years. Developed land parcels in South Khobar are important targets for small to medium sized developers due to more acceptable land costs in these areas. South Khobar is also an attractive location for individual investors interested in real estate investments. Most developers and investors interviewed by Colliers are of the opinion that prices in South Khobar are expected to rise more rapidly than in other areas of Dammam and Al-Khobar. Due to its proximity to both Dammam and Al-Khobar the Telal Al Doha area is being targeted by medium sized developers for the construction of villa projects. Villas in this area are being marketed at prices that appeal to middle income households. Colliers Research suggests that the current absorption rate of multi-family dwellings, apartment submarket reached 81 percent to 86 percent of 2011YTD supply. Demand for apartment units outweighs demand for single-family dwellings (villa and duplex units) with absorption rate of the latter reaching 78 percent to 79 percent of 2011YTD supply. Apartments are increasing in popularity, in comparison to villas, primarily due to their affordability. The outskirts of Dammam and Al-Khobar offer reasonably priced houses ranging from SR850,000 to SR1,200,000, favored by mid income households. Although moderately priced products are available in the peripheral areas of Dammam and Al-Khobar, most new developments have undergone rapid price increases over the past year. Single family dwellings (villas) are offered at an average of SR3,510/m2, while multifamily dwellings (apartments) are priced at SR2,841/m2. These developments are primarily targeted at upper mid to high income households, leaving pent up demand for low to mid income households close to the centre of the city. This is a typical trend observed throughout the Kingdom. This review focuses on the three most dominant residential markets in the Eastern Province of Saudi Arabia, namely Dammam, Dhahran and Al-Khobar. The importance of these cities is underscored by the fact that Dammam is the third largest city in Saudi Arabia, and Saudi Aramco is based in Dhahran. According to the 2010 census statistics, the populations of Dammam and Al-Khobar grew by a CAGR of 3.3 percent and 4.0 percent respectively between 2004 and 2010. It is this growth in population, combined with the fact that average family size in Saudi Arabia is decreasing, that is the primary driver of demand for residential space in the three cities. Colliers' Research said in general, the quality of residential stock (recently added or under construction) in Dammam and Al-Khobar is higher than those of other cities in the country, due to a higher standard of construction, improved finishing, and better periodic maintenance. Historically the property market in Dammam has focused more on the residential sector.
