Arab News, Sun, Mar 17, 2024 | Ramadan 7, 1445
Home ownership eyed by 77% of Saudi-based expats, reveals survey
Saudi Arabia:
A new premium residency visa has spurred home-ownership demand among Saudi-based
expats, with 77 percent now looking to buy a property, a survey has revealed.
Global property consultancy Knight Frank surveyed
241 expatriates in Saudi Arabia, and discovered the primary motivation for real
estate purchasing in the Kingdom, especially among millennials, is its perceived
status as a good investment.
The desire for a close proximity to work and
cultural or religious factors followed closely behind.
The survey findings also indicated a preference
among expats for completed apartments over villas, with a potential demand of
$863 million from the white-collar workforce for giga-project properties,
alongside notable interest in branded residences among higher-income brackets.
The newly introduced premium residency visa linked
to property ownership aims to meet some of the demand, however, the survey
indicates that only 9 percent of respondents are willing to spend over SR3.5
million ($930,000), while the visa threshold is set at SR4 million.
Challenges arise as most respondents are
comfortable allocating up to SR1.5 million for property in Saudi Arabia, with a
substantial portion unwilling to exceed SR750,000.
Additionally, average property prices in Riyadh
and Jeddah range between SR800,000 and SR2.7 million, posing further constraints
for this group.
Survey findings also underscore a greater
propensity for investment among millennials, with 22 percent allocating budgets
exceeding SR2.5 million, while female expats show a higher-end budget allocation
surpassing SR3.5 million.
The total combined budget among the 241 surveyed
expats amounts to SR318.3 million.
The urgency of demand according to Knight Frank is
not immediate, as survey results revealed that only 26 percent are looking to
buy this year while 44 percent are aiming for a purchase within the next year to
24 months.
This cautious approach, as per the firm, could be
attributed to the significant rise in house prices over the past three years,
with Riyadh experiencing apartment prices at SR5,150 per sq. m. and villa prices
at SR4,900 per sq. m.
This surge in demand is driven by the government’s
goal of achieving a 70 percent home ownership rate by 2030, supported by
mortgage programs. However, according to Knight Frank, the increased demand has
also led to affordability challenges, resulting in a 16 percent decline in
overall transactional activity last year.
The firm emphasizes the substantial influence of
the Kingdom’s Vision 2030 in making Riyadh the top choice for property
purchases, particularly among millennials. This is attributed to the city’s
appeal as an attractive destination for tourism and entertainment, thanks to the
various entertainment seasons and a wide array of cultural, sporting, and arts
events created by the authorities.
In the survey, Jeddah emerged as the second most
desired city for property purchase, followed by Dammam and Madinah.
The survey revealed a notable shift in expat
preferences, with 68 percent expressing a strong inclination towards owning an
apartment rather than a villa. This preference is particularly strong among
those aged 35-45 and 45-55, the firm added.
Additionally, the choice between apartments and
villas seems to vary with income levels. For instance, 92 percent of expats
earning more than SR40,000 per month prefer villas, while 60 percent of those
earning between SR30,000 and SR40,000 per month lean towards townhouses.
The shift from villas to apartments for the
majority of respondents is likely influenced by factors such as the higher cost
associated with villas, affordability considerations, and possibly differing
cultural preferences compared to Saudi nationals, the firm said.
The appeal of apartments is further highlighted by
the fact that 53 percent of surveyed expats expressed a preference for owning a
two or three bedroom apartment. This inclination is likely due to the smaller
family sizes typically found among expats compared to Saudi nationals.
Knight Frank showed that 63 percent of respondents
prefer to buy completed properties, while 26 percent are interested in off-plan
purchases. This preference may have implications for developers according to the
firm as they navigate Saudi Arabia’s 660,000 residential unit pipeline in the
next six years.
Expat property buyers are willing to pay an
average annual service charge rate of 5.9 percent of the property value.
According to Knight Frank, the rising demand for
residential communities is driven by an increasing number of Western expatriates
seeking a lifestyle that matches their expectations.
These gated communities, known for their amenities
such as swimming pools, cafes, and fitness centers, offer a high standard of
living, the firm noted.
Western compounds are characterized by their
larger size, superior services, extensive amenities, and heightened security,
typically catering to Western expats.
In contrast, non-Western compounds are smaller,
with fewer facilities, and primarily occupied by Arab and Asian expats.
In Knight Frank’s survey of expats, a notable
appeal was found for residential compounds, with 75 percent expressing interest,
a figure that rises to 77 percent among millennials.
This interest, as per the firm, correlates closely
with income, with the percentage climbing to 94 percent among those earning over
SR40,000 monthly. Among expats under 35, this percentage rises further to 85
percent, with females showing particularly heightened interest compared to
males.
According to the report, Riyadh has 131
residential compounds, with 38 categorized as Western and 93 as non-Western.
Jeddah, on the other hand, has 98 gated compounds, including 19 Western and 79
non-Western.
The top three sought-after features in a
residential community include onsite essentials such as supermarkets and
clinics, management services including maintenance and security, and
transportation facilities like bike storage and parking.
According to Knight Frank, NEOM emerged as the
most sought-after giga-project among expats. However, discrepancies between
their budgets and the project’s expected prices posed a limitation. Nonetheless,
a considerable proportion of respondents, particularly millennials, expressed
willingness to reconsider their budget to afford a residence in NEOM.
Mohamad Itani, Knight Frank partner and head of
residential project sales and marketing, said: “High earning expats are eager to
own property in the Kingdom’s giga-projects and the fact that high earners are
prepared to spend more on giga-project homes will be welcome news for
developers, but the key will be to offer distinctive community features and
amenities that go above and beyond.”
The average budget for giga-projects among expats
stands at SR2.7 million, surpassing the SR1.7 million average elsewhere in the
Kingdom. This translates to a total spending power of approximately $152 million
among Saudi surveyed expats. When projected to the Kingdom’s 1.2 million
white-collar workforce, the potential dry powder capital is estimated to be $863
million.
The top pull factors for owning a home in any of
the giga-projects, as indicated by respondents, were parks and green spaces and
family entertainment. Following closely were investing in Saudi Arabia’s future
Vision 2030, world-class entertainment and theme parks, and climate. These
factors outline the key considerations expats have regarding giga-project
homeownership.
However, expats emphasized that local bank
financing options would significantly influence their decision, especially given
the discrepancy revealed between expats’ budgets and the current market pricing
for branded residences, which surpasses what they can afford.
According to Knight Frank, the rising popularity
of branded residences in Saudi Arabia presents a lucrative opportunity for
developers, considering the strong demand from both global high net worth
individuals and expats.
With 55 percent of expats willing to spend up to
SR1.5 million, there is potential for developers to introduce branded products
into their residential portfolios.
Offering timeshare options and collaborating with
local banks to provide mortgages could further stimulate demand, the firm
concluded.