77% of Saudi-based expats would like to own a home in the Kingdom, rising to 85% 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%), followed by Jeddah at 24%. Dammam and Madinah (11% each) follow in joint third place.
Knight Frank surveyed 241 expatriates in Saudi Arabia to understand their attitudes, aspirations and appetite towards real estate investment in Kingdom. 56% of this group have resident in the Kingdom for over 10 years and 76% 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, 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 SAR 4 million, but just 9% of expats would be prepared to spend over SAR 3.5 million.
“Whilst 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% want to transact this year. 44% – 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 last 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% of expats would like to buy a completed property, instead of something off-plan”.
75% of expats are willing to allocate under SAR 1.5 million for a potential property purchase in the Kingdom, with almost 40% unprepared to spend over SAR 750,000. This is undoubtedly a key consideration for developers in a market where average prices in cities like Riyadh range from SAR 800,000 for a 2-bedroom apartment (700,000 in Jeddah) and rise to SAR 2.7 million for a three-bedroom villa (2.8 million in Jeddah).
Knight Frank says Saudi Arabia’s residential market has registered significant price growth over the last three years, with apartment (SAR 5,150 psm) and villa (SAR 4,900 psm) prices in Riyadh climbing to record levels that stand 26% and 21% 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% (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 last three years, Knight Frank says it is perhaps unsurprising that 57% 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%), followed by ‘cultural and religious reasons’ (29%)”.
According to Knight Frank’s research, 84% of expats plan to purchase a property for personal use. 46% intend to use their purchased property as a main residence, and 39% would like to buy a home for their dependents. 51% 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% of the expats we surveyed would much rather own an apartment. This figure rises to 74% and 73% for those aged 35-45 and 45-55, respectively.
“This is likely due to a combination of factors, including the significant costwhen 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% of expats on salaries of over SAR 40,000 per month would like to purchase a large 5+ bedroom home and would like to do so for between SAR 1.5-2.5 million. With 5-bedroom villa prices in Riyadh today averaging over SAR 3 million, 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.”
Community spirit
While expats in the Kingdom have shown high levels of interest in owning a home (77%), 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 (supermarket, clinic, dry cleaners) (33%), management services (maintenance, security, reception) (30%) and transport facilities (bike storage, dedicated parking, public transportation access) (27%).
De Jong concluded: ““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.”
