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Real estate prices rise in Jeddah and Riyadh: Study

RIYADH - There has been a rise in real estate prices in the northern parts of Riyadh and Jeddah, according to a recent study conducted by the Oxford Business Group (OBG).

OBG is a global publishing, research and consultancy firm, which publishes economic and political intelligence on the markets of the Middle East, Africa, Asia, Eastern Europe and the Caribbean.

Saudi Arabia's growing population is the reason for escalating prices in the Kingdom's two key real estate markets of Riyadh and Jeddah, the study found.

The growing population is driving up demand for residential properties, said Rakesh Kunhiraman, Director of OBG's Consulting Division. He said the growth witnessed in prime and emerging localities of the cities marked a turnaround for the Kingdom's two key real estate markets.

The economic downturn had pushed down prices, while Jeddah also had to contend with further fallout from the flash floods, which hit the city late last year.

"Figures indicate that both cities are earmarked for tremendous growth, especially in prime residential districts and new growth areas in the north of Riyadh and Jeddah," he said.

Low-cost housing units will gain prominence over the next few years as population growth pushes up demand. "We expect the low and mid-income section of the population to be the primary demand driver for the residential sector, with affordability playing a key part in growth. "We also expect low-cost housing, such as multi-storey apartments, to gain prominence during the coming years as the Kingdom's rapidly growing population stretches demand to an estimated 1.5 million new units by 2015," Kunhiraman said.

He said that the districts of Al-Masiaf, Al-Muruj, Al-Mursalat and Al-Ghadir, located in the north of Riyadh's Central Business District (CBD), were generating interest among buyers, while the localities to the north of Jeddah, including the corridor close to the Corniche, were earmarked for growth. "Riyadh's development has shifted towards the northern district due to high land prices coupled with limited availability in the core CBD areas of the city," he said.

He said the market is now showing gradual signs of recovery, particularly in prime residential districts, which have witnessed a rise of three percent in sale prices over the past 12 months.

Kunhiraman said that prices in Jeddah's sought-after Corniche were being kept steady following the construction of a number of high-rise luxury apartments in the area.

"Thanks to their proximity to the Corniche the northern districts in Jeddah such as Al-Andalus, Al-Basateen, Al-Hamra, Al-Khalidiyah, Al-Mohammediyah, Al-Nahda, Al-Nayeem, Al-Rawdah, Al-Salamah, Al-Shatee and Al-Zahra are proving popular. This trend is extending toward the northern corridor," he said.

By Shahid Ali Khan

© The Saudi Gazette 2010