Saudi apartment and villa rents have risen 30% due to higher construction costs. This is especially true in the coastal city of Jeddah, the country’s economic capital, though rents in this area are expected to drop.
For more on Saudi real estate, see:
- Saudi Arabia Curbs Skyrocketing Rent Hikes
- Saudi Oil Revenues Fuel Real Estate Boom
- Saudi Addresses Housing Shortage
Rent prices for the Kingdom rose 8.0% in 2012 after rising 8.5% in 2011 due to the passing of a mortgage law, which encouraged home ownership, removing some of the pressure on rents. Nonetheless, there are growing concerns that the rent increases are pricing some Saudis out of the housing market.
The rising rent prices are a major concern as Saudi Arabia is currently suffering from a housing shortage caused by the rapidly growing population. The country needs an estimated 2 million additional housing units to meet the public need.
The higher rents are also due in large part to rising construction costs. According to a report by Arab News, Saudi real estate experts say that the cost of construction for housing has risen from SR95 to SR130 per square meter. There are several reasons for this, including higher wages for construction workers and building managers, as well as the cost of finishing new apartments as larger ones are divided.
The Saudi housing and commerce ministries as well as the Council of Chambers of Commerce recently announced that they are working to create a system to prevent rents from rising higher. Rents would be set according to a variety of criteria, including age of the building, design and location. The Capital Market Authority is also issuing guidelines to prevent real estate investment from pricing Saudis out of the market.