According to the most recent study by international consulting firm Knight Frank, apartment-linked mortgages in Saudi Arabia’s housing industry increased by 8% in the 12 months leading up to the end of May as buyers searched for more inexpensive ways to own a home in the Kingdom.
Although having a villa continues to be Saudi Arabia’s top aspiration, apartments are quickly becoming a more practical alternative from an affordability viewpoint, despite the fact that the cost of such flats is rising in important cities like Riyadh.
According to the data, the average apartment price in the capital city increased by 10% between January and June.
According to the report, buyers are experiencing a decline in their purchasing power due to the rising cost of borrowing, which increased from 3 per cent to 5 per cent last year. This is especially true for the segment of villas, where the number of mortgages issued fell by 2 per cent during the period.
However, with 68 per cent of all mortgages given, the villa category continues to be in the lead. Apartments came in second with 27 per cent, and residential land plots accounted for the remaining percentage.
With a population estimated to reach 15-20 million in Riyadh by 2030, the need for housing in the city is set to rise, particularly for smaller homes, apartments, and rental units. This occurs as a new type of housing demand has begun to emerge in the Saudi Arabia capital as a result of the influx of local migrants and expats.
The Ministry of Housing is expanding choices to satisfy the rising demand for affordable homes and meet the government’s aim of 70% homeownership by 2030 despite the market’s continued lack of supply.
Jeddah, a port city, had a 1% increase in villa prices during the second quarter of this year, while average apartment prices rose by 2% during the same period.
According to the survey, the Dammam market prices were performing unevenly, with average apartment prices rising by 5% in the second quarter of this year compared to the same quarter in 2022.
Villa prices, on the other hand, fell by 2% in the second quarter of this year compared to the same time in 2022.
The research also stated that there were few to no transactions for villas in the second quarter of 2023, indicating that the demand in Dammam is mostly for flats for already-built units.
According to the survey, the inability to acquire villas and their scarcity is to blame for this hesitation to purchase them.