All segments of Jeddahs real estate market slowed down during the first quarter of this year.
According to a report by US-based JLL, the Saudi citys slowdown has been attributed to an inbalance between supply and demand, as well as the wider macroeconomic dynamics across the kingdom.
The demand and supply mismatch is expected to widen as more retail and office supply is expected to enter the market with the easing of backlog projects, according to JLLs Jeddah real estate outlook report for the first quarter of this year.
The residential segment was affected by the loss of buyer sentiment, said the firm, with the villa market witnessing a 5.4 per cent decline in sale prices and a 2.5 per cent fall in rentals.
As a result, the apartment segment fared better than villas as people find them to give more value for money. Prices and rents remained stable over the first quarter, the report added.
A total of 4,000 units (consisting of standalone villas and apartment buildings) entered the market in the first quarter. The most notable project completed was Daem Residences, which added 120 apartments to the market.
Saudi Arabian Monetary Agency (Sama), the kingdoms central bank, announced it will allow specialised mortgage companies to increase their maximum contribution to home financing to 85 per cent.
It is difficult to anticipate the impact the change in mortgage regulations will have on homeownership, but it is in line with the governments recent announcement that the Housing Ministry is aiming to ensure 75 per cent of Saudi citizens own houses by 2020.
According to a statement from the ministry, the housing target amounts to about 1.5 million families. The aim is to cut the time to required to get a construction licence from six months to two months.
For office space, the market witnessed a further slowdown in the growth of lease rates. The decline is expected to continue due to demand constraints throughout 2016. Jeddahs office market has historically been dominated by the public sector and government bodies.
Lease rates have increased by 2 per cent year-on-year. However, quarter-on-quarter rates decreased by 1 per cent. Vacancy rates on the other hand remained stable at 5 per cent as of the first quarter of this year, although this is down from 6 per cent in the previous quarter.