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|28 July, 2016

Real estate market in Eastern Province falls

Real estate in the Eastern Province has witnessed a sharp decline

Image used for illustrative purpose. A view shows newly constructed residential buildings in Riyadh

Image used for illustrative purpose. A view shows newly constructed residential buildings in Riyadh

REUTERS/FAISAL NASSER
28 July 2016
DAMMAM -- Real estate in the Eastern Province has witnessed a sharp decline and the prices of land, houses and even rent have gone down considerably. However, interestingly, rents in extravagant housing compounds keep spiraling and reaching unbelievable levels.

Prime land in the cities of Al-Khobar and Dammam have gone down by roughly 5 percent and realtors fear that the prices may slide further in coming days. Interestingly in neighboring Bahrain which is just across the King Fahd Causeway the real estate is witnessing a modest upward trend both in terms of land and properties as well as rents.

The decline in the Eastern Province is interpreted as a reflection of a declining oil price and shelving o0f some planned projects. "Investors are too keen to invest in Bahrain and in Europe particularly in the United Kingdom," said Abdul Hadi, a realtor in Dammam who has witnessed the unprecedented growth in 2010 onward.

After the debacle in the share market in 2006, investors saw real estate as safe haven for investment. And in the past five years they have yielded a very healthy return on the investment, Abdul Hadi said. But 2016 witnessed a sudden drop in construction activity in the region and some p0rime properties which were earlier in high demand went a begging with not too many buyers showing their interest, he said.

Abdul Aziz Al-Misfir, another realtor in Al-Khobar, was, however, optimistic. "It is a very temporary phase and not much should be read in declining prices. Around this time of the year real estate does witness a decline due to slowdown in business activities as a result of extreme weather conditions and extended summer holidays when most of the businessmen retire to the resorts in the Kingdom and abroad," he said.

However, he admitted that there is sudden drop in rent rates and to him it was an alarming trend. He attributed decline in rent rate to departure of many expatriates from the Kingdom and mass movement of expat work force to adjacent areas like Ras Al-Khair where major projects are coming up at Ma'aden and Sadara. "The impact of sharp movement of workforce is seen in Jubail which is closer to Ras Al-Khair and where rents are going high both in the Jubail city as well as in Royal Commission area", he said.

The construction activity in Rakah area as well as Petromin district was on peak as demand of houses was highest in this area due to its proximity to International Indian School which has more than 18,000 students and many Indians prefer to stay in that area for their convenience.

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However, construction activity has slowed down in both the areas, particularly in Rakah area and one could see a long line of unfinished apartments.

Realtors are hopeful that the real estate price will bounce back in the next two to three months with the easing of weather conditions and return of businessmen from holidays. However, they are apprehensive of declining house rent and believe that it may fall further in coming days as companies are sending back a large number of their expat work force in order to meet the stringent Saudization laws.

© The Saudi Gazette 2016

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