Rents and house prices surged in Saudi Arabia's two main cities in the first quarter of the year, underlining the need for affordable housing in the kingdom.
The rise is feeding through to an increase in rents in Riyadh and Jeddah for both villas and apartments, according to reports released yesterday by Jones Lang LaSalle.
"In Riyadh average villa prices have increased across all districts, however, districts in the north and west have experienced greater increases than those to the east and south," wrote the property services firm in the reports. The average sale price of apartments has risen in the east, south and west of the capital, it said.
Villa rents rose by 8 per cent in the first quarter from the same period last year, with rents for high-income villas in the west and centre of the city rising the most robustly.
Apartment rents had grown even more strongly, up 13 per cent year-on-year.
In Jeddah, average sale prices of villas climbed 11 per cent to 4,600 Saudi riyals (Dh4,505) per square foot in the first quarter of the year from the same period last year. Sale prices of apartments also rose.
Villa rents in Jeddah's popular western region increased 4 per cent during the year. Rents for apartments surged even faster, up 10 per cent.
Rising housing costs are likely to raise pressure on the government to do more to help low-income households.
Jones Lang LaSalle expects 23,000 new residential units to be completed in Riyadh before the end of the year, with a further 16,000 units in Jeddah. But only a minority of the projects are likely to be aimed at lower earners.
For many years, the kingdom's property market has failed to cater for surging affordable housing demand from a rapidly growing young population.
In a bid to bridge the shortfall, low-income housing was put forward as a central plank of King Abdullah's 458 billion riyals spending package, unveiled last year, to raise living standards among its citizens. Some signs of progress are emerging, however.
The first affordable housing project in Riyadh is expected to deliver 2,000 units over the next five years, Jones Lang LaSalle said.
In Jeddah, the ministry of housing has identified two locations for affordable housing projects but details have yet to emerge on what the projects involved, it said.
In a rare private-sector project aimed at the affordable housing segment, the Henaki group has started a 1,000-unit building scheme in Jeddah's Kandarah area, according to Jones Lang LaSalle.
The scheme is believed to be one of the first large-scale projects targeting low to middle-income families.
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