Saudi Arabia’s residential property market is expected to maintain its momentum despite macroeconomic challenges caused by the coronavirus pandemic, JLL, a US commercial real estate services company, said in a new report Wednesday.
The outlook was supported by the recent decision by the Kingdom’s authorities to exempt proety deals from the 15 percent value added tax (VAT) rate, and instead impose a 5 percent VAT rate on transactions, JLL said.
“In addition to the positivity injected by the recent government measures, the residential sector also showed strong construction activity in Q3 2020 with around 10,000 units handed over in Riyadh and Jeddah. This brings the total residential supply to 1.3 million and 834,000 in Riyadh and Jeddah respectively,” Dana Salbak, head of research for JLL MENA said.
“Looking ahead, residential rental rates in the Kingdom are expected to remain under pressure in the short-to-medium term, namely on the back of wider macroeconomic factors such as the growth in unemployment rates, and consequent contraction in household incomes,” Salbak added.
Meanwhile, the office sector has seen downward pressure across the Kingdom, with Riyadh performing better overall.
JLL noted that the retail market saw mall operators and owners continuing to retain tenants and maintain quarterly averages through the use of incentives such as rent free period s and temporary discounts. The sector will remain under pressure throughout the short-term as more supply enters the market, JLL said, as competition heats up.