Residential rents in Jeddah have increased by an average of 14 percent so far this year, real estate consultants Jones Lang LaSalle said on Sunday.
Its Jeddah Real Estate Market Overview for Q3 2011 said the city’s residential sector had seen an “robust upward trend” between July and September.
Soraka Al-Khatib, co-head of Jones Lang LaSalle Saudi Arabia said: “The Jeddah market has seen a continued increase in land sales during 2011 as trading volumes and sale prices have picked up further during the last quarter. “There is strong interest from developers to deliver additional residential supply to meet the city’s growing requirements.
“Rental levels have also increased with a 14 percent increase in average rents being recorded over the year to date.” King Abdullah’s announcement of additional funding for the affordable housing sector has had a positive impact on the Jeddah residential market, the report added. Following this announcement, government related entities such as JDRUC and PPA are now planning to deliver more than 30,000 additional residential units across Jeddah over the next few years.
The report said there was also strong continued interest in the luxury segment of Jeddah’s residential market. Al-Khatib added: “The strength of the Jeddah residential market is confirmed by the fact that most of the 16,000 units coming to the market over the remainder of 2011 have already been sold.”
The limited future supply pipeline and the city’s growing population is expected to drive prices and sustain demand throughout the remainder of 2011 and into 2012, he said. Saudi Arabia has a fast growing population of 27 million people, most of whom are under the age of 30. Real estate service company Jones Lang LaSalle estimates annual demand for housing to be between 150,000 and 200,000 units per year. The JLL report also said office rents are likely to reduce in 2012 once additional supply is released to the market. The expected CBD supply pipeline will provide approximately 60,000 sq m of additional space to the current stock of 445,000 sq m by the end of 2012.
“As a consequence, the office market is expected to remain tenant favourable during the next two years,” the report said. Jeddah’s retail centres continue to benefit from high occupancy rates and the majority of the new supply has already been preleased, JLL added. Its report said retail sales have increased by more than 30 percent during the last eight months which demonstrates strong consumer spending.
The first three quarters of 2011 also showed a marked improvement in Jeddah’s hotel occupancies with rates increasing five percent year-on-year, the report added. JLL said growth in business travel is expected to fuel hotel demand in the city.
Craig Plumb, head of research at Jones Lang LaSalle MENA said: “The SR500m economic stimulus package announced earlier in 2011 has sustained the Jeddah real estate market during 2011.
“With Saudi Arabia’s oil output having been boosted to offset lower supply from other MENA producers and oil prices remaining relatively stable over recent months, there is likely to be increased investment in the infrastructure and real estate sectors of the economy over the next 12 months.”