There is increasing demand for affordable housing in Riyadh as Saudi Arabia's population growth continues to outstrip property market supply, according to Chestertons.
Its Riyadh Real Estate Market Overview for Q2 said that Riyadh's population has grown by 52 percent over the past 15 years and currently stands at 6.5 million in 2016.
However, only 500,000 units have been built during the same period, leading to a dearth of low cost housing across the capital, Chestertons said.
"The Saudi government is all too aware of the acute shortage in low cost housing units, but continuing low oil prices have resulted in inevitable cuts in public spending, which has in turn hit public housing projects," said Declan McNaughton, managing director UAE, Chestertons MENA.
"So far the impact on rental rates has been minimal, but it is beginning to drive prices higher in some areas that have traditionally provided value-led accommodation for budget conscious tenants," he added.
The report said average annual rental rates for apartments in Riyadh are currently $7,182. In the sought after central Riyadh area, where the most expensive rental rates are to be found, the Al Wahah district tops the list at $18,700 while the district of Jarir was the least expensive at $9,350 (SAR35,000).
It added that average rental rates for villas in Riyadh are $31,510 with the city centre once again proving to be the most expensive with districts Al Wahah, Al Muruj, Al Sulimaniyah, Al Wurud, and Al Olaya commanding prices of $66,665.
The average sales price for an apartment in Riyadh is currently $117,771. However, districts across Riyadh top out at $186,661 including the districts of Hittin in Northern Riyadh, Al Raid in Western Riyadh, Al Hamras in Eastern Riyadh and in Central Riyadh, Al Wahah is the most expensive at $239,993.
Average sales prices for a villa are $476,768 with the highest averages typically being commanded in the city centre with the lowest in South Riyadh.
"Sales have slowed however, the move by the Saudi Arabian Monetary Agency (SAMA) to adjust the loan-to-value ratio for mortgages could help reinvigorate the market, particularly for those who had previously struggled finding the necessary funding," said McNaughton.
"Furthermore, as the market begins to bottom out we anticipate renewed interest from buyers who have been waiting for the optimum time to purchase," he added.
Chestertons said the office and commercial sector has seen a number of projects completed in the first half of 2016, including Al Nakel Tower, which alone increased the city's supply of office space to 2.5 million square metres of gross leasable area.
Vacancy rates generally remained stable at 16 percent while there was a slight decline experienced in the business district while rents rose slightly across different areas of the city.
"While there have been some major projects completed, there have been further delays to the King Abdullah Financial District development. We expect there to be around 800,000 square metres of leasable area by 2018, up from 160,000 square metres in 2016," said McNaughton.
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