Off-plan properties can transform Saudi real estate market | Kanebridge News
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Off-plan properties can transform Saudi real estate market

Off-plan residential offerings can help bridge the gap of 1.5 million housing units in Saudi Arabia, directly contributing to goals set out in Vision 2030

By Press Release
Thu, Feb 1, 2024 11:27amGrey Clock 3 min

Insights from PwC Middle East’s latest report, “Saudi Arabia’s off-plan market: A driving force fueling a vibrant and sustainable society” shows that off-plan sales models can increase the effectiveness and affordability of the Kingdom’s real estate market, directly contributing to goals set out within Saudi Vision 2030.

As part of its National Housing Program, Saudi Arabia has set out a target of increasing home ownership to 70%, up from 47% in 2016. Achieving this goal requires a significant leap in residential real estate supply by approximately 1.5 million housing units or 115,000 units annually. The Kingdom’s National Transformation Program as well as the Ministry of Municipal and Rural Affairs and Housing (MoMRAH) have introduced several innovative products and initiatives to support this objective, such as market-ready units provided by real estate developers or individual owners, access to financial institutions for housing support, and setting up a legal framework for housing programs.

In a historically ready-property market, off-plan properties provide an opportunity for both local and foreign investors to create more affordable housing options, thereby boosting the GDP of the Kingdom. Off-plan sales can also stimulate and grow the banking sector to create financial solutions that could cater to different beneficiary segments, grow the real estate brokerage market, and stimulate multiple purchases from investors.

Highlighting the findings, Imad Shahrouri, Housing and Real Estate Cluster Leader, PwC Middle East, said: “Since its launch in 2016, the off-plan sales approach has become a key product to achieve the objectives set out in the National Housing Program. It has been a key factor in accelerating the process of home ownership, increasing capabilities of real estate developers to undertake large and integrated projects and stimulating supply. Off-plan sales  have paved the way for evolutionary change within the local real estate market, creating a collaborative ecosystem for business consultants, construction contractors, private developers and financiers, as well as marketing agencies and sales brokers.”

Recent years have seen a surge in off-plan property sales in the Kingdom, recording 52% growth in the first half of 2023, compared to the same period in 2022. The Kingdom’s real estate market has now made it a feasible possibility for a new generation of Saudi to own their own property. In tandem with considerable changes made to the local real estate market, including the development of comprehensive and clear regulations, cultivating stronger partnerships between public and private sector players and empowering developers, the Kingdom can bridge the gap between supply and demand for residential housing. However, the off-plan sales in the country is relatively new, and obstacles such as a lack of clear regulations, insufficient awareness, and trust issues need strategic interventions for successful implementation.

Marketing & Product Positioning: The cultural preference for ready-made units in Saudi Arabia poses a significant challenge to the off-plan sales. Buyers typically favor tangible products over waiting for properties to materialize in a few years. To overcome this, a cultural shift towards embracing off-plan sales is necessary. Marketing plays a pivotal role in this transformation, requiring developers to bring awareness to local consumers about the benefits of off-plan sales purchases and implement effective pricing strategies.

Location: Off-plan sales projects often face challenges due to their distant locations from city centers and essential services. Developers need to recognize the importance of proximity to amenities, transportation, schools, and other facilities.

Rising Interest Rates: The gradual increase in interest rates, particularly in 2023, has adversely affected the off-plan sales. Higher interest rates slow down the housing market, as banks may struggle to meet the financing demands of multiple projects, creating a liquidity challenge. Striking a balance between liquidity and financing demands becomes crucial to navigate this challenge.

Shortage of Developers: Saudi Arabia faces a shortage of developers with the necessary knowledge and experience to keep up with the fast pace of Vision 2030 objectives. To address this, the Kingdom can bring in more regional real estate developers as well as working to provide more support and training for local Saudi developers.

Quality Assurance: Buyers often rely on developers’ promises and marketing materials, raising concerns about the quality of off-plan sales properties. Delays in project completion and handover further diminish client confidence and investment returns. Implementing robust quality assurance mechanisms and addressing factors contributing to project delays, such as construction issues, permitting delays, and changes in market conditions, are essential.

“The successful implementation of the off-plan sales will increase the effectiveness and the efficiency of the real estate market in Saudi Arabia and increase the market depth through attracting additional local, regional and international developers on a global level,” Added Shahrouri.

Overcoming challenges through strategic measures can unlock the full potential of off-plan sales, contributing significantly to Vision 2030 goals and fostering a robust, collaborative real estate ecosystem in the Kingdom.



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UAE Residential Market Review Shows Strong Growth and Record Transactions in Q1 2024

The total transaction volume in Abu Dhabi for the first quarter of the year reached 2,795.

Thu, May 16, 2024 4 min

The CBRE Middle East, a global leader in commercial real estate services and investments, released its latest edition of the UAE Residential Market Review for the first quarter of 2024.

Abu Dhabi Market Overview

During the first quarter of the year, the total volume of transactions in Abu Dhabi stood at 2,795, registering a 22.6% increase compared to the year prior. This increase has been underpinned by an 18.1% rise in off-plan sales and a 34.5% rise in secondary market sales. In the year to Q1 2024, Abu Dhabi’s average apartment and villa prices increased by 4.3% and 2.3%, respectively.

Abu Dhabi’s rental market witnessed a total of 46,130 residential rental contracts in Q1 2024, registering a decline of 10.9% from the year prior. This has been due to a 15.5% decline in the number of renewed rental contracts registered and a 2.4% drop in new rental registrations over the same period. In the year to Q1 2024, average apartment and villa rents have increased by 4.5% and 1.1%, respectively. On the supply front, only 80 units have been delivered in Abu Dhabi in the first three months of the year, with all of this new stock being in Al Raha Beach. An additional 8,660 units are expected to be completed by year-end with 55.8% of this scheduled stock located in Yas Island, Al Sowwah, and Al Shamkha.

Dubai Market Insights

In Dubai, price growth has continued to accelerate during the first quarter of 2024, with average prices increasing by 20.7% in the year to March 2024. Throughout this period, average apartment and villa prices increased by 20.4% and 22.1%, respectively. Although headline average sales rates are still marginally below the 2014 highs by 0.1%, several prominent residential neighbourhoods have already surpassed their 2014 figures.

As of March 2024, average apartment prices stood at AED 1,486 per square foot, and average villa prices reached AED 1,776 per square foot. Average villa sales rates are currently above their 2014 baseline by 22.9%. Rental growth has also gained momentum in 2024, after a period of moderation in 2023. In March 2024, average residential rents registered a year-on-year increase of 21.2%, up from the 20.4% growth registered a month earlier. Over this period, average apartment and villa rental rates grew by 22.1% and 14.5%, respectively. Data from the Dubai Land Department revealed that, in the year to date to March 2024, the total number of rental registrations stood at 159,941, marking an increase of 5.8% from the previous year. As for supply, a total of 6,526 units were delivered in the first quarter of the year, with 59.7% of this supply being located in Meydan One, Jumeirah Village Circle, and Al Furjan. A further 46,086 are expected to be handed over the remainder of the year. However, given historic materialisation rates, the report expects that a limited portion of this upcoming stock will come online as planned.

Record-Breaking Transactions

March 2024 witnessed another record in Dubai’s residential market, with transaction volumes reaching the highest monthly figure on record, marking a year-on-year growth of 13.2%. Throughout this period, off-plan sales and secondary market sales increased by 20.2%, and secondary market sales increased by 2.2%.

In the first quarter of 2024, Dubai’s total transaction volumes reached 35,310. This is the highest total ever recorded in the first quarter of the year, marking an increase of 20.5% from the year prior. Over this period, off-plan transactions recorded an increase of 23.9%, and secondary market transactions rose by 15.2%.

However, in Q1 2024, the total number of sales transactions within the prime market segment registered a decline of 2.1% compared to the year prior. Throughout this period, super-prime transactions recorded a drop of 16.5% year-on-year to stand at a total of 227. These declines witnessed in both markets have been largely underpinned by significant declines in off-plan sales largely attributable to the high levels of demand for off-plan properties and the limited level of upcoming supply. In terms of performance, in the first quarter of 2024, average prime prices registered a year-on-year increase of 16.0%, standing at an average of AED 4,661 per square foot, and average super-prime prices grew by 14.8% over this period, reaching AED 4,978 per square foot.

Taimur Khan, CBRE’s Head of Research MENA in Dubai

Future Projections 

Looking ahead, CBRE expects Dubai’s residential sales market to maintain its upward trajectory. Prices in both the apartment and villa segments of the market will continue to grow, however, not at the same pace. On the rental front, we forecast that residential rents will continue to increase. That being said, the rate of growth will likely moderate.

Taimur Khan, CBRE’s Head of Research MENA in Dubai, comments: “The UAE’s residential market started the year on a relatively strong note, where the elevated demand levels continue to drive performance. The strong levels of activity and high absorption levels, which have reduced available supply, will continue to support price growth in both Abu Dhabi and Dubai over the remainder of the year. In terms of rental growth, we expect that rental rates in Abu Dhabi will continue to rise, with prime areas set to outperform the market. In Dubai, residential rents will continue to increase; however, not at the same rate that we have been seeing to date, and we expect that the rate of change will diminish in the second half of the year.”

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