There was a drop in rental prices across all major property classes in Jeddah during 2017, according to a report by KPMG Al-Fozan & Partners.
Residential apartment rental prices dropped by 10-15 per cent during the year as expatriate families left the kingdom. The decline ends the trend of rising rental prices for apartments in the preceding years.
Sale prices and rental rates of residential villas also declined during 2017, continuing a trend that began after the implementation of a white land tax in the kingdom. The tax has led cautious behaviour from investors and end-users, resulting in a considerable drop in activities in the segment.
The performance of the retail sector remained subdued in 2017 with a 4-5 per cent decline in rentals. New upcoming supply, if delivered as planned, is likely to put more pressure on the rental rates.
For the office sector, both rentals and occupancy rates have dropped over the past year. While there has been a modest decline in rental rates of Grade-A offices, rentals of Grade-B office buildings located at secondary locations witnessed a higher drop of 8-10 per cent.
The performance of hospitality sector softened in 2017 and both the occupancy rates and the Average Daily Rates (ADR) declined. The occupancy rate fell 8 per cent, while ADR dropped 2-3 per cent. Adding further pressure in the future, some 5,000 hotel keys will come onto the market in the coming two to three years, which will increase the current hotel stock by 47 per cent.