Colliers: Riyadh Residential Overview Q4 2011
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The road to home finance has been a long one for the Kingdom, but with its highly anticipated mortgage law edging ever closer to ratification, would-be homeowners and financial institutions are gearing up for a new era of opportunity.
With the announcement this year of a US$66.7 billion initiative to address the demand-supply imbalance in the Kingdom’s housing market, social infrastructure spend is topping the Government agenda as it focuses on building affordable homes for the future.
The South-East Asian island has seen a number of distinctive developments come to fruition over the past few years as the country further establishes itself.
The residential property sector in Riyadh continues to be characterized by on-going increases in the price of completed residential units as well as vacant land.
Market demand is being driven primarily by a rapidly growing, young population seeking solutions for their residential requirements.
From an affluence perspective the Riyadh market is essentially divided along an east-west axis with the up-market, mid to high end developments located in the northern areas of the city. Developments targeted at the mid to lower end of the market are concentrated in the southern parts of the city.
It is therefore not surprising that most of the forthcoming master-planned residential developments are concentrated in the north of the city (the so-called New Riyadh). The only exception to this trend is the Al Qasr project which is to be developed in the south of the city by Dar Al Arkan. Whilst some of these developments have commenced construction, the majority are still in the planning and pre-construction phases.
At this stage most of the residential developments in Riyadh as well as other cities in the Kingdom are being undertaken by small to medium sized developers, with developments by the large developers such as Dar Al Arkan, Al Arjan, Maskan Arabia etc. accounting for less that 15% of the overall projected growth in supply in Riyadh in the coming two to three years. It is not felt that there is any significance in this trend. It is simply a matter of smaller developers being more mobile and able to respond to market demands more rapidly than the large developers. The smaller developers also target smaller land parcels ranging between 5,000 m² and 15,000 m² rather than the huge raw land parcels that the large developers would typically target for master plan developments.
Areas that are currently experiencing particularly strong levels of demand are districts such as Al Yasmine, Al Hamra, Ishbeliyah and Qortoba. The greater demand in these areas can be attributed to the construction of the new ring road connecting the airport and other road network projects as well as the development of new governmental, administrative and cultural centres. In north Riyadh, large scale projects by the ArRiyadh Development Authority have enjoyed high absorption levels because of demand flowing from the development of the Princess Norah Bint Abdul Rahman University, the King Abdullah Financial District (KAFD), the Business Gate development and the Granada Housing and Business Park.
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