JEDDAH: Property prices in some areas of Saudi Arabia have surged by as much as 40 percent in the second half of this year, fueled by inflation and anticipation over the expected introduction of the mortgage law, Banque Saudi Fransi said in its survey on Saudi real estate for H2. Based on the property asking price data collected from 37 real estate companies and agencies across Saudi Arabia, the survey also noted that a rowing number of Saudis favor larger apartments (135-190 sq m) and smaller villas (300-400 sq m), with families opting to live in villas if they can afford it. Villa sale prices jump across the country, including median gains for small villas of 19 percent in Riyadh and 17.1 percent in Jeddah since H1. With 59 percent of the population under the age of 30, the study indicated that the demand for villas and apartments would continue to rise, leading real estate agencies to increase prices. The median asking sale price for small villas in Riyadh rose by 19 percent overall. In Jeddah, the same figure saw a 17 percent rise. Again, however, demand for small villas in north Jeddah - by far the most expensive area covered by the survey - pushed prices up by over 20 percent from a year ago. Villas in north Jeddah are almost 170 percent more expensive than similar sized properties in the southern part of the city, BSF said. By comparison, advertised rates for large villas in both cities remained more stagnant. Countrywide, BSF said that the median asking price for small villas had increased by 3.2 percent. While apartments attracted a good deal of attention among home buyers, it was villas, especially those in the upmarket north, that rebounded in an exuberant way in 2010. The median price of in-demand smaller villas (300-400 sq m) in Riyadh jumped 19 percent in H2 compared with H1 due to enormous jumps in villa rates in the northern parts of the city of as high as 40.6 percent. The median villa price in the Saudi capital is now SR1.23 million compared with SR1.03 million in H1. Villa prices in the capital city are up a substantial 30.3 percent from a year ago. Saudi families tend to prefer living in villas than in apartments, which helps explain the vast increase in prices. There has been a shortage of supply in villas in this category, enabling estate agents to hike up prices, although the purchasing power of Saudis is still relatively moderate. Over time, demand for apartments is set to grow as a result of the country's young demographic and income trends. Smaller villas in North Riyadh are now substantially more expensive than they were in 2008. Asking prices for villas averaged as high as SR1.83 million in north Riyadh, more than double the price of equivalent homes in south and west Riyadh. Average price gains were more muted in those two areas, up 2.4 percent and 5 percent, respectively, from H1. Prices also increased in the Eastern Province, but not to the same extent as Riyadh or Jeddah. In Al-Khobar, the most expensive city in the area, prices rose by 3.3 percent for a large apartment and 4.2 percent for a smaller apartment. Apartment prices also rose across the board, with the biggest increases noted in upscale districts in Jeddah and Riyadh. Overall, the median price of a large apartment rose by 4.7 percent during the period, still slightly below the highs of 2008. The value of small apartments increased by eight percent, surpassing 2008 figures. Commercial land, too, is rising in price again after the median going rate for a prime plot slumped 17 percent between H2/2008 and H1/2010, according to the survey based on estate price data collected on six Saudi cities: Riyadh, Jeddah, Dammam, Al-Khobar, Dhahran and Makkah. Mirroring an acceleration of inflation this year, rents for residential and commercial units climbed in most neighborhoods in H2. However, BSF also said that the long-awaited mortgage law would not revolutionize the property sector immediately, and banks would take a calculated approach. “While it is hoped the law's passage will allow much wider access to property ownership, this reality could take time,” the report said. “At least in the medium term, the law is not poised to benefit the majority of Saudis whose monthly income stands below SR8,000. Paying SR464,167 for a large apartment and SR1.06 million for a small villa - the median country-wide prices in H2 - is simply out of reach for most young people.”
