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According to JLL’s KSA Real Estate Market Overview for 2015
JLL, the world's leading real estate investment and advisory firm, today released its annual review of the KSA Real Estate Market for 2015, assessing the latest trends in the office, residential, retail and hotel sectors. In the macro background of lower oil prices and reduced government spending, the report highlighted the Riyadh market maintaining steady performance, while Jeddah showed continued growth momentum.
Mr Jamil Ghaznawi, National Director and Country Head of JLL KSA, said: "We have witnessed a shifting demand in the residential market in both Riyadh and Jeddah, as the trend moves towards property rentals from sales. Residential transactions declined by 5% in the Year-to-November 2015 compared to the same period in the previous year. We expect rental demand to continue in 2016 but at a slower rate in comparison to 2015, while little or no change is likely in the sales market in 2016. However, this situation may change once the regulations surrounding the 'white land tax' are released"
"Lower oil prices have put pressure on economic growth, liquidity, government budgets, the stock market and asset prices. This scenario has led to cuts in subsidies and reduced government spending and has also impacted the financing of real estate projects. A more selective approach can be seen, with an increased focus on critical infrastructure and affordable housing projects. On the other hand, there is reduced spending on less urgent projects, resulting in delays or scaling back of many projects".
With new hotels opening in Riyadh this year, there may be downward pressure on ADRs and occupancy rates due to increasing competition. However, we expect the Jeddah hotel market to remain relatively stable in the near to medium term. Even though there is new supply of Jeddah hotels, there is strong demand to absorb any new supply, as result of religious tourism and higher occupancies during school and public holidays."
"In regards to the office market, Jeddah has witnessed a steady and healthy growth along with new supply of quality space. On the other hand, Riyadh rentals have remained relatively stable as occupiers exercised relative caution in terms of expansion as the economy slows down."
Looking into 2016 and beyond, Mr. Ghaznawi remarked: "We are entering a very challenging period as oil touches new lows and the government cuts spending and subsidies. It is encouraging to see that the government is taking steps to diversify the Saudi economy. Such structural initiatives will have long term benefits and will contribute towards the positive development of the Saudi real estate market. Moreover, new laws allowing full foreign ownership of wholesale and retail business will attract foreign investment, which will ultimately benefit the real estate market. And finally, religious tourism will remain a growth sector in Jeddah and the Western region, and could support new hospitality supply."
SECTOR SUMMARY HIGHLIGHTS –RIYADH:
SECTOR SUMMARY HIGHLIGHTS – JEDDAH:
Riyadh prime rental clock
This diagram illustrates where JLL estimates each prime market is within its individual rental cycle at the end of the relevant quarter.
Jeddah Prime Rental Clock
*Hotel clock reflects the movement of RevPAR.
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