As many as 30,000 new dwellings will enter Jeddah's residential market by 2020, as vacancy rates climbed, and rents fell by 10 to 15 percent last year, KPMG Al Fozan & Partners said in a new report.
"The majority of the new supply is focused towards the north and east sides of the city as the central zones have become saturated with limited availability of land, while seafront areas are expected to offer further high-end products in the future," the consultancy added.
Most of the upcoming supply will be provided by Al Ra’idah Investment company, owned by the Public Pension Agency, that will deliver 6,160 apartments and 1,180 villas in different phases. Other prominent residential projects slated for completion include the Gardenia Residence, Al Farida, Al Mayar, Masharif, Diyar Al Salaam and Al Hilal Tower 2.
The current residential market supply is of 800,000, the report estimated.
According to KPMG, rentals of residential apartments in Jeddah dropped by 10 to 15 percent in 2017, contrary to the upward trend witnessed in the preceding years.
The drop in rentals came as a consequence of the departure of families of some expatriates, especially those with middle income, which contributed to an increase in the vacancy rate in the market, it added.
"While the residential real estate market in Jeddah is currently witnessing a correction in the sale and lease rates, this would serve the interest of the nationals by reducing cost of housing which is a primary objective of any government," said Rani Majzoub, head of real estate, KPMG Al Fozan and Partners.
"The attractive investment opportunities is for real estate developers who bring with them value-added real estate products/services and take into consideration the needs and abilities of their end users; since the old strategy of buying, keeping, and speculating land prices has no future potential anymore,” he added.
Meanwhile, KPMG said performance of hospitality sector softened in 2017 with both the occupancy rates and the average daily rates (ADR) witnessing a declining trend.
Occupancy rates were down 8 percent, while ADR remained relatively stable, dropping only by two to three percent.
Jeddah will witness delivery of around 5,000 hotel keys in the coming two to three years, which will increase the current hotel stock by 47 percent, the report noted.
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