KSA apartment yields beat GCC benchmarks in 3Q: Jeddah topped regional apartment rental yields in 3Q 2024, with a 2-bedroom (2BR) unit averaging 11.7%, according to real estate platform Sakan’s Saudi Arabia Residential Property Report (pdf). That’s nearly double average apartment yields in Doha, Dubai, and Abu Dhabi, which ranged between 5-6%. Meanwhile, a 3BR unit in Jeddah yielded 9.7% in rental yields and a 4BR 7.4%. In Riyadh, apartment yields were similarly high, ranging between 9.1-11.5%, while Dammam (6.2-6.6%) and Khobar (5.3-7.4%) yields are closer to regional averages.

(** Tap or click the headline above to read this story with all of the links to our background and outside sources.)

Villa rental yields: Mid-sized villas (351-600 sqm) averaged higher yields of 4.9% to 7.1%, compared to small villas (below 350 sqm) which ranged between 4.9% and 5.6% yields. The highest yields were seen in West Riyadh's mid-sized category at 7.1%, followed by mid-sized villas in Jeddah at 6.5%. Meanwhile, the lowest yielding villas were in East Riyadh, where both small and mid-sized properties generated yields of 4.9%.

IN CONTEXT- Saudi Arabia's real estate price index rose 2.6% y-o-y in 3Q 2024, driven by a 1.6% increase in residential real estate prices and gains of 1.9% in apartments and 1.5% in villas. Sakan’s report notes the demand for high-quality residential properties—especially 3BR apartments in key neighborhoods—is driving up prices, with foreign ownership liberalization and buyer-friendly mortgages ramping up pressure on supplies.

Speaking of, what are rents like these days? Demand for housing by an influx of expats is driving up rent prices, the report notes. Riyadh, particularly North Riyadh, topped the Saudi market in 3Q 2024, with 3BR apartments averaging SAR 98.3k annual rents. Dammam had the lowest rental incomes, with 2BR apartments racking up SAR 22.9k per year. Meanwhile, large villas in Northern Riyadh were the most expensive properties in terms of rent, averaging SAR 242k per year. Small villas were considerably cheaper, averaging SAR 68.7k a year in West Riyadh.

REMEMBER- Rent has been a major driver of consumer inflation in the Kingdom, with house rental prices — the heaviest weighted component in the domestic consumer basket — rising 11.2% y-o-y in September on the back of a 10% surge in apartment rentals.

Property prices in 3Q: 5BR units in Riyadh were the highest-selling apartment types in 3Q, averaging SAR 1.3 mn per unit, while 2BR units in South Jeddah were the cheapest at SAR 320.8k. Mid-size villas in Riyadh were also the costliest, averaging SAR 5.75 mn per unit, with small villas in Jeddah coming in as the least expensive category, averaging SAR 880k per unit. The median price for all villas listed across the Sakan platform during the third quarter was SAR 1.7 mn.

Market snapshot: The Kingdom saw real estate transactions exceeding SAR 127.3 bn in 1H 2024, with the majority involving residential properties. Residential transactions are also the fastest growing segment of the real estate market by transaction value. Real estate accounted for nearly 6% of GDP in 4Q 2023.

How far will SAR 1 mn take you in the Saudi apartment market? Dammam offers the most space for money, with SAR 1 mn buying a 333 sqm apartment, followed by South Riyadh (329 sqm) and East Jeddah (294 sqm). North Riyadh had the most expensive offers per sqm, with the same budget buying 131 sqm-sized apartments.

What’s moving the needle in the Saudi real estate sector? Strong economic fundamentals, population growth, and robust demand for mortgages on the back of declining interest rates are driving demand for Saudi real estate, S&P Global reports. Visa and regulatory reforms are also expected to boost FDI in residential real estate. Meanwhile, private developers face challenges from rising construction costs and competition for financing from other non-oil diversification projects.

The government has also been rolling out policies to achieve a 70% home ownership target by 2030, including buyer-friendly mortgages to encourage Saudi citizens to acquire housing. The Kingdom needs to build out an additional 1.2 mn housing units by 2030 in order to hit the target.

Foreigners are also getting incentives: The Premium Residency Visa program targets residential sector investments by foreigners. Foreigners can obtain the “Saudi Green Card” when acquiring properties valued at SAR 4 mn or more.