Expats in Saudi Arabia could make use of premium visa rule changes and secure property investments in the Kingdom, according to Knight Frank research.
77 per cent of Saudi-based expats would like to own a home in the Kingdom, rising to 85 per cent for those aged below 35, according to global property consultancy Knight Frank’s inaugural Destination Saudi report.
The top target cities for home ownership by expats living in the Kingdom are Riyadh (44 per cent), followed by Jeddah at 24 per cent. Dammam and Madinah (11 per cent each) follow in joint third place.
Saudi real estate investment
Knight Frank surveyed 241 expatriates in Saudi Arabia to understand their attitudes, aspirations and appetite towards real estate investment in Kingdom.
56 per cent of this group have resident in the Kingdom for over 10 years and 76 per cent of respondents work in the private sector.
The release of these findings closely follows the government’s recent announcement in January regarding the introduction of new Premium Residency options, including a property-ownership linked visa.
Faisal Durrani, Partner – Head of Research at Knight Frank, MENA, said: “The recent new Premium Residency visa linked to property ownership is likely to help satisfy the pent-up demand to purchase from expats who have for so long been watching from the side-lines.
“The threshold to qualify for the new property owner Premium Residency visa is SR4m ($1.1m), but just 9 per cent of expats would be prepared to spend over SR3.5m ($953,000).
“While this yet-to-be-unlocked demand will be encouraging news for developers, the demand from expats appears to be in a holding pattern.
“Just 26 per cent want to transact this year. 44 per cent, the bulk of expats, would rather buy within the next 12-24 months. This behaviour possibly stems from the significant house price rises recorded across the Kingdom over the past three years, which may be prompting a wait-and-see approach.
“This behaviour will likely play into developers’ hands as they race to deliver the 660,000 plus homes announced since 2016, particularly as 63 per cent of expats would like to buy a completed property, instead of something off-plan”.
75 per cent of expats are willing to allocate under SR1.5m ($400,000) for a potential property purchase in the Kingdom, with almost 40 per cent unprepared to spend more than SR750,000 ($200,000).
This is undoubtedly a key consideration for developers in a market where average prices in cities like Riyadh range from SR800,000 ($213,000) for a two-bedroom apartment (SR700,000/$187,000 in Jeddah) and rise to SR2.7m ($720,000) for a three-bedroom villa (SR2.8m/$747,000 in Jeddah).
Knight Frank says Saudi Arabia’s residential market has registered significant price growth over the past three years, with apartment (SR5,150 psm) and villa (SR4,900 psm) prices in Riyadh climbing to record levels that stand 26 per cent and 21 per cent above the last peak in 2016, respectively, underpinned by exceptional demand.
The supercharging of domestic demand has stemmed from the government’s 2030 home ownership target of 70 per cent (it currently stands in the low 60s per cent), which has been complemented by a wide range of supportive mortgage programs that have helped to accelerate the transition from renting to owning.
The exceptional level of demand has precipitated growing affordability challenges, which are contributing to the slowing in overall transactional activity, according to Knight Frank.
Given the widely publicised news of the strong house price growth across the Kingdom over the past three years, Knight Frank says it is perhaps unsurprising that 57 per cent of expats say the main driver behind the desire to buy a home stem from it being a “good investment opportunity”.
This is followed by wanting to live closer to their place of work (35 per cent), followed by “cultural and religious reasons” (29 per cent)”.
According to Knight Frank’s research, 84 per cent of expats plan to purchase a property for personal use. 46 per cent intend to use their purchased property as a main residence, and 39 per cent would like to buy a home for their dependents. 51 per cent of expats aged 35-45 say they will use the property as their main residence.
Destination Saudi also investigates home size preferences for expats in the Kingdom and finds that most would prefer to live in an apartment.
Harmen de Jong, Regional Partner – Head of Consulting, MENA explained: “In stark contrast to Saudi nationals, two-thirds of whom have their sights set on purchasing a villa, 68 per cent of the expats we surveyed would much rather own an apartment.
“This figure rises to 74 per cent and 73 per cent for those aged 35-45 and 45-55, respectively.
“This is likely due to a combination of factors, including the significant cost when purchasing a villa compared to an apartment, as well as perhaps a stronger cultural affinity for Saudis to own and live in stand-alone family homes.
“29 per cent of expats on salaries of over SR40,000 ($10,700) per month would like to purchase a large five-plus-bedroom home and would like to do so for between SR1.5m ($400,000) and SR2.5m ($667,000).
“With five-bedroom villa prices in Riyadh today averaging over SR3m ($800,000), this highlights the disconnect between expectations and reality and perhaps hints at the upper limit of what some of the wealthiest households are prepared to pay.”
While expats in the Kingdom have shown high levels of interest in owning a home (77 per cent), certain concerns were raised when it comes to specific community facilities, without which, the desire to purchase would be significantly diminished.
The top three features sought when contemplating the purchase of a home in a residential community are:
- Onsite essentials, 33 per cent (supermarket, clinic, dry cleaners)
- Management services, 30 per cent (maintenance, security, reception)
- Transport facilities, 27 per cent (bike storage, dedicated parking, public transportation access)
De Jong said: “The residential market dynamic is changing in the Kingdom, with younger Saudis and expats now demanding greater access to community living. Many cities around the country remain relatively under provided in this regard.”
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