Fall in prices in Saudi Arabia: perhaps the crisis is over
According to reports, the prices of houses in Saudi Arabia have been the worst in the entire world, up until September. The real estate index in fact decreased by 6%. What is the current situation in Saudi Arabia?
Here are the data for the previous year:
• Residential area prices fell 6.3% in 2018.
• Apartment prices have fallen by 3.5%
• The prices of the villas have fallen by 4.7%
• In 2018, the home real estate index decreased by 0.7%
Generally, therefore, we are talking about a not excessive collapse, but nevertheless not to be underestimated. We believe that this circumstance has been present, and still is, since 2016. Why can we talk about a slow recovery?
The fall in prices could end because there has been a slow recovery. In particular, in the first weeks of September, apartment prices increased by 0.5%. (if adjusted to inflation, it is called 1.3%). In the capital of Saudi Arabia, Riyadh, apartment prices have remained unchanged in the last three months. Even in the luxury segment there is talk of a slight increase.
But who encouraged real estate investments? And above all, why?
In recent years, the Saudis have spent their "petrodollars" with caution, returning from the experiences of the 1980s. In doing so they chose to opt for a convenient market that would probably have yielded over time: the real estate one.
Furthermore, it should be pointed out that after the recession of the 1990s, a law on foreign investments was approved in 2009. This initiative allowed and allows non-Saudis to own a private residence provided they obtained a license from the Ministry of the Interior. To avoid any form of speculation, however, it is necessary that five years pass before a property is sold. The only limit is the ban on buying real estate in the holy cities of Mecca and Medina. (In these cases, the lease contracts are possible, but must not exceed two years).
It is therefore easy to understand how in recent years, the interest in the Arab real estate has increased, also given the convenience in buying a property even for a foreigner.
After noticing then that the request to purchase a property has materialized in a continuous and constant manner, it is easy to understand how on the supply side, it was right to increase prices. A little bit to improve the local economy, a bit to assign more value to an asset that is gaining more and more interest.
Despite the economy should suffer a physiological slowdown, the yields deriving from real estate, however, seem to be more than positive.
Demand and supply are therefore on the same level, and, with the due precautions accompanied by the right local policies, one will probably arrive at a general productive and balanced situation.
Here are the data for the previous year:
• Residential area prices fell 6.3% in 2018.
• Apartment prices have fallen by 3.5%
• The prices of the villas have fallen by 4.7%
• In 2018, the home real estate index decreased by 0.7%
Generally, therefore, we are talking about a not excessive collapse, but nevertheless not to be underestimated. We believe that this circumstance has been present, and still is, since 2016. Why can we talk about a slow recovery?
The fall in prices could end because there has been a slow recovery. In particular, in the first weeks of September, apartment prices increased by 0.5%. (if adjusted to inflation, it is called 1.3%). In the capital of Saudi Arabia, Riyadh, apartment prices have remained unchanged in the last three months. Even in the luxury segment there is talk of a slight increase.
But who encouraged real estate investments? And above all, why?
In recent years, the Saudis have spent their "petrodollars" with caution, returning from the experiences of the 1980s. In doing so they chose to opt for a convenient market that would probably have yielded over time: the real estate one.
Furthermore, it should be pointed out that after the recession of the 1990s, a law on foreign investments was approved in 2009. This initiative allowed and allows non-Saudis to own a private residence provided they obtained a license from the Ministry of the Interior. To avoid any form of speculation, however, it is necessary that five years pass before a property is sold. The only limit is the ban on buying real estate in the holy cities of Mecca and Medina. (In these cases, the lease contracts are possible, but must not exceed two years).
It is therefore easy to understand how in recent years, the interest in the Arab real estate has increased, also given the convenience in buying a property even for a foreigner.
After noticing then that the request to purchase a property has materialized in a continuous and constant manner, it is easy to understand how on the supply side, it was right to increase prices. A little bit to improve the local economy, a bit to assign more value to an asset that is gaining more and more interest.
Despite the economy should suffer a physiological slowdown, the yields deriving from real estate, however, seem to be more than positive.
Demand and supply are therefore on the same level, and, with the due precautions accompanied by the right local policies, one will probably arrive at a general productive and balanced situation.
