Jeddah to win big from housing spend, study says
Jones Lang LaSalle says government funds and more land will pay off
Jeddah will be a key beneficiary of the Saudi government’s investment in its housing market with public-private partnerships a potential source of construction, Jones Lang LaSalle has found in a study.
The property firm has earmarked the city for increases in rent and sale prices at the same time that the city’s municipality has boosted the supply of land to new residential projects by 2,500 hectares to help curb the steep rise in land prices and help meet inventory issues.
The second-biggest Saudi city is likely to see strong investment in affordable housing on the back of the government’s plan to build 500,000 new houses across the country at a cost of around $66.65m (SAR 250bn) to meet the needs of a swelling and younger average population.
Residential rents have increased since the start of the year as demand outweighs supply, according to the company’s ‘Jeddah City Profile – June 2011’. This is the opposite trend to the office sector, where tenants can negotiate on price due to an oversupply.
“Saudi Arabia recently received an additional economic boost from the government’s multi-billion riyal financial package,” wrote Soraka Al-Khatib, co-head of Jones Lang LaSalle Saudi Arabia. “Affordable housing was the largest single component, which reflects the government’s prioritisation of housing its young and growing population.
“Like the rest of Saudi Arabia, Jeddah is particularly well positioned to benefit from this massive flow of public capital into housing and infrastructure. Although this stimulus package will have several wide-ranging implications, one of the most important is establishing structures – like public private partnerships – that facilitate delivery of such large scale, critical projects.”
It is also see investment from the Real Estate Development Fund, the study found.
Saudi Arabia’s property market grew by 4% last year against zero growth in 2010, according toJohn Harris, country head for Saudi Arabia at Jones Lang LaSalle. Speaking at a CW conference on 1 June, he estimated that this figure would rise to 5.7% by the end of this year. He warned that with escalation in land costs, “you can’t have affordable housing left, right and centre”, though saw a great future for new residential compounds.
Last week, Makkah governor Prince Faisal annoucned the launch of a $45.33m project to develop Jeddah's Corniche, an area that has seen a spurt of private development. This adds tio the 30,000 new houses his office will build in the city to meet the shortfall of homes and replace units destroyed by floods earlier this year.