As the annual inflation rate in the Kingdom eased to 9 percent in December, down from 9.5 percent a month earlier, the real estate market in the Kingdom is witnessing a pause in growth. Several newly constructed apartments can be seen lying vacant due their high rents. The global financial crisis has put an end to the real estate boom in the Kingdom and the Gulf countries. Land prices have fallen by almost 15 to 20 percent in the Eastern Province. But real estate sources said that the low demand has not resulted in a fall in rents. “I agree that there has been a slowdown in the market as expatriates as well as citizens have become more selective. Newly constructed family apartments are now available across the Kingdom, but there are few customers as there is a huge difference in rents (30 to 40 percent) between old and new buildings. Landlords are not in a position to reduce the rents since they have invested heavily in the construction of these buildings, an official of a leading real estate company in Dammam told Saudi Gazette. The recent steep hike in rents has forced a large number of residents to either send their families home or opt for sharing accommodation. Newly constructed two-bedroom family apartments are now available at rents ranging from SR17,000 to SR23,000 depending on the location in Dammam, whereas in Al-Khobar and Jubail the same type of flat will cost SR25,000 to 30,000. Most of the newly constructed apartments have small bedrooms, small windows and no balconies. The decline in the demand for apartments is also related to the smaller number of professionals coming to the country, compared to previous years. The high inflation and the skyrocketing cost of living have forced some professionals to quit their jobs here and look for employment in other countries. A real estate agent said the majority of foreigners coming into the Kingdom are unskilled or semi-skilled workers and they are not the real customers for the newly constructed villas and apartments. Although demand for residential properties has fallen, it is still difficult to find building owners who are reducing their rents. An Indian expatriate working in a real estate office in Al-Khobar pointed out that “although there is a lack of demand, in particular for family flats, still no request for reducing rents is entertained by owners.” Most of the agents feel that residential rents will stay at current levels for some time, he added. In the meantime, most expatriates expect a considerable fall in flat rents soon as owners of some newly-built apartments, who are holding on to their properties hoping that the demand will improve, have begun to worry since they are under pressure from banks to start repaying their loans. Kashif, a Pakistani expatriate, said most of the land owners have taken loans to develop buildings. “They are now under pressure to pay bank installments. This has given me hope that a fall in rents is around the corner. I am waiting for that to happen soon,” he said.
