JLL report highlights role of Sakani program in the increased momentum for delivery of units despite global pandemic
Saudi Arabia’s government drive to increase home ownership amongst nationals continued to gather momentum in the first quarter of 2020, according to JLL, a specialist in real estate and investment management.
In its Q1 2020 KSA Real Estate Market Performance report, JLL said that with the Kingdom’s leadership working on its ambitious plan to boost home ownership to 60% by the end of the year, the delivery of residential units for Saudi nationals in Riyadh and Jeddah remained active during the open quarter.
The Sakani program is being delivered as part of Vision 2030 and was launched to provide more than 500,000 residential units across the Kingdom, at an estimated cost of $133 billion. By the end of the decade, the program aims to achieve 70% home ownership for Saudi nationals, the report added.
In Riyadh, a total of 7,500 units had been delivered in the first three months, while in Jeddah, the number had reached 1,800, it added.
“In the short-to-midterm, demand remains supported by the Sakani program and the various mortgage products launched over the past couple of years,” remarked Dana Salbak, the head of research for Mena region at JLL.
“However, in light of the current conditions and with no specific stimulus package in support of the residential market, we can expect somewhat of a slowdown in demand over the coming period,” noted Sablak.
In the office sector, the drop in oil prices, combined with a shift in the work environment towards remote working practices, has resulted in a slowdown in demand for office space. This has reflected on the performance of office spaces in Riyadh and Jeddah, resulting in declines of between 4%-6% across both Grade A and Grade B spaces, the JLL report said.pSakani
The retail sector in the kingdom has enjoyed an improved performance over the past year, however, it is expected to see a prolonged period of lower consumer appetite due to the current global pandemic. In contrast, demand for retail-driven warehousing will be active as restrictions on movement and trade have led to a shift in consumer behaviour, with online shopping (e-commerce) becoming more popular.
“This aligns with some of the strategic goals of Vision 2030, which aims to increase the proportion of online payments from a target of 28% this year, to 70% by 2030,” said Salbak.
As with other markets around the world, the hospitality industry in Saudi Arabia kicked off the year strongly, with occupancy rates in Riyadh and Jeddah, registering improvements in the year-to-February 2020 when compared to the same period last year, recording 74% and 58% respectively.
However, the period which followed, saw hotel performance levels decline as travel restrictions took effect, pointed out Sablak.
With the suspension of the Umrah season and uncertainty around the Hajj pilgrimage, which begins in late July, the performance of the tourism and hospitality market in the kingdom is likely to remain sluggish for the remainder of this year, particularly in Jeddah, which is considered a transit city for pilgrimages to Makkah and Madinah, she added.