Activity in Saudi Arabia’s residential real estate market has seen a "marked increase" over the past year on the back of a range of government initiatives, according to new research.
Knight Frank said a range of regulatory, finance and supply side reforms have been enacted to underpin activity in the sector.
Looking ahead, as these initiatives further take effect alongside the provision of additional affordable residential stock, Knight Frank said it expects the volume of the residential transactions to maintain positive momentum.
"With regards to sales price performance, we expect performance to remain stable in the short to medium term," it added.
Saudi Arabia’s GDP is forecast to increase by 2.2 percent in 2020 according to IMF data.
Knight Frank said the country's office market is likely to remain favoured towards occupiers in the year ahead as rents are set to trend downwards. However, it also expects to witness a fragmentation in relative performance in key commercial hubs and asset grades.
In Riyadh, where strong rates of employment growth are being witnessed, vacancy rates in the Grade A segment are set to continue to decline at the expense of increased vacancy in the Grade B segment of the market. As additional Grade A stock is delivered Knight Frank said it is likely to see a flight to quality.
The Dammam Metropolitan Area and Jeddah have, over the course of 2019, both witnessed challenging market conditions driven by a slowdown in the oil sector for the prior and due to relocations of key occupiers in the latter.
In these markets, Knight Frank expects challenging market conditions to continue as occupiers consolidate and as additional supply enters the market. These trends are likely to put sustained pressure on average rents and occupancy rates going forward.
The report said Saudi Arabia's retail sector has seen stability over the past year as a result of the government’s economic diversification strategies and the drive to boost Saudi nationals’ and female workforce participation rates.
"We expect rental rates in regional and super-regional malls to remain stable in the short run across all key commercial hubs. However, Grade B stock is likely to continue softening given the influx of quality retail supply due to come to fruition."
As a result of recent easing of tourism visa regulations, where the citizens of 49 countries are now able to apply for e-visas and holders of Schengen, UK or US visas are eligible for visas on arrival, Saudi Arabia is likely to witness a marked increase in visitation, Knight Frank added.
Despite these encouraging developments, muted performance in key performance indicators is expected across major tourism hubs over the short to medium term due to the influx of new supply.