Saudi Gazette

JEDDAH — The Saudi “residential sector experienced slight declines in both rentals and sale prices in Q2. With the exception of the Eastern Province and hospitality in Jeddah, prices and rents have declined year-on-year according to recent statistics,” said Arron Browne, Managing Director of Sloanes Real Estate Brokers.

Prime areas in Riyadh continue to suffer from an oversupply despite demand from professional services firms keen to take part in the kingdom’s diversification efforts, he added.

Also lack of supply in ‘affordable segment’, which has been traditionally neglected by developers in favor of luxury property, is another impacting factor, he noted. The demand supply gap for affordable housing is expected to reach more than 1 million units in the kingdom’s five key regions alone.

“Moreover, high land prices are forcing developers to look at sites up to 30km outside of the city for affordable projects and labor challenges remain unique to Saudi Arabia, he further said.

Others are deemed common across the Gulf region, he added.

Browne said “Bayat Plaza, a development by The Sabban Group, aims to overcome these factors by offering quality homes at affordable to mid-range prices. We have partnered with Bidaya Home Finance to give buyers the chance to take a mortgage and open their own home, as opposed to renting.”

On the solutions, he said stability and market confidence are essential to the success of any housing market. “We see this situation improving greatly toward the end of 2017 and into 2018. As regional political differences settle, questions and implications of the aforementioned. White Land Tax are answered and nerves over VAT are calmed. Then we will see investor confidence in the housing market in Saudi Arabia.“

“It is also important to note that off-plan investing is a relatively new concept in the Kingdom and there must be a proven track record of returns on investment (ROI) in order to create a property buying frenzy. Once the projects in progress are completed and savvy investors are rewarded with high percentage increases on their assets, as well as impressive rental returns, then other will follow suit and look to step onto the property ladder,” he elaborated.

“Currently the market is lacking attractive homes at affordable prices where first time buyers wish to live. Bayat Plaza bridges that gap and can offer spacious 2 bedroom apartments with sea views for SR 1.2 million up to duplex living ‘Sky Villas’ of 3 and 4 bedrooms where larger families can live the villa lifestyle with all the security and accessibility of a compound at their feet,” Browne continued.

On oil price fall, Browne said that it has affected the economy in Saudi Arabia, as has the introduction of the White Land Tax. However, with these two factors alone stabilizing, Sloanes sees the real estate market beginning an upward curve in 2017 and 2018, with developers and government working together to ensure projects are built and delivered to certain, expected and accepted specifications. Again, the simple economics of the real estate markets indicates that the current situation can only improve if supply starts to lean toward demand, coupled with increased facilities to ease finance options for buyers, then the owner-occupier market will witness resurgence.

On the new general real estate authority support and what is required of it, Browne explained that the real estate upswing and the subsequent downturn that Saudi Arabia experienced a few years ago led to the creation of some important legislations that have helped stabilize the market. Saudi Arabia has now put a framework in place that is aimed at safeguarding the interests of potential buyers as well as the developers. Furthermore, these regulations have also enhanced market confidence and we are hopeful that such measures will sustain the long-term growth of the Saudi real estate sector.

The General Authority for Real Estate will be financially and administratively independent and has broad powers to propose amendments and improvements to all laws, regulations and policies related to real estate activities.

The Authority will review the relevant laws and regulations and determine the appropriate procedures for dealing with them, either by transferring them to the Authority or working with the relevant authorities to improve them in order to achieve the desired objectives. The Authority should also conduct awareness campaigns on the sector's legislations and regulations, and encourages investment to achieve balance and sustainability.

Saudi Arabia’s real estate market is well documented in having a shortage of supply and continued high demand. In addition, there is a vast number of the population (circa 75%) who are between the ages of 30 – 45 years old. This creates a huge market for first time buyers, when supported by finance options (through Bidaya Home Finance). Sabban Group has seen a great deal of demand for affordable and mid-level housing and this rules out vast villas with accompanying land/gardens; residential towers are very often the more economical choice for first time buyers, newly married couples and young families and this is where we believe the growing market is. When built to suit the market, residential towers offer this niche market segment the opportunity to get onto the property ladder.

In addition, Bayat Plaza is located in the heart of Jeddah next to many business headquarters and commercial hubs. Compound developments are forced to build outside of the city, giving their residents long commutes in heavy traffic. In building a ‘vertical compound’ with retail facilities and residents’ amenities at the foot of the building, Bayat Plaza offers all the benefits of villa living but in the center of Jeddah.

To Browne, residential towers offer a more affordable option for Saudis to buy a home and live in it, as opposed to having to rent. Bayat Plaza 2 bedroom apartments are 115 sqm and start from SR1.2 million Riyals. With financial assistance through Bidaya Home Finance, that means that buyers can pay SR180,000 as a down payment and take a mortgage to own their own property. This property will only increase in value and the buyer can then sell it on at a profit at a later date.

“As mentioned above, high rise living is a relatively new concept in Jeddah and I firmly believe that once a quality project, such as Bayat Plaza, is delivered on time and occupied by satisfied buyers and tenant, then Saudis will realize first hand that quality finishing, outstanding views and excellent facilities is not only affordable but also, can turn a profit for those who invest early in such developments.” Browne said

In addition to the already mentioned financial benefits, there are so many benefits to high-rise living. If we compare it to a villa, for example, then the initial benefits are the low maintenance costs; apartments have significantly lower maintenance costs than villas, as well as big savings on utility consumption. For those who are buying one or several apartments as an investment, we conservatively predict returns from 6-8% annually over a 5 year period. So not only will the younger generation of Saudi be able to own their own home, they can avoid wasting money on rent and be part of an iconic and lucrative development in the heart of Jeddah.

Also, the concept of vertical living or a vertical compound is that everything is available to the resident without leaving the building. Bayat Plaza is serviced by over 2,300 sqm of retail on the ground floor; supermarkets, cafes, restaurants, dry cleaning, pharmacies, just to name a few. All of these advantages are accessible to residents without leaving the building. Secure underground parking is another benefit to residential towers, as is security in general, funded by an Owners’ Association so that the cost is shared significantly as opposed to a burden on one single owner.

Villas do not have stunning views over Jeddah, however Bayat Plaza’s towers stretch 34 floors and 150m into the sky and have views of the sea and over the city of Jeddah throughout. Finally, the shared facilities within a residential tower are extremely beneficial and often superior to those offered by traditional villa-living; children’s play areas, gymnasium, family function rooms and business lounges etc. all maintained to the highest standard and with a cost also shared by a resident’s association.

For now, The Sabban Group is focusing on Bayat Plaza’s future before handover and that, once occupied, the towers are run smoothly and to the benefit of all occupiers. Manazil LLC (the development arm of Sabban Group) will be funding the first 2 years of service charges, meaning that those who purchase before handover at the end of 2017 will enjoy all the benefits of Bayat Plaza’s facilities for free. This not only rewards off-plan investors but also, allows The Sabban Group to be secure in the knowledge that their flagship development has longevity in its value. A development’s worth is only truly realized once occupied and we aim to make sure that Bayat Plaza is the most popular living address in Jeddah in 2018.

Once this is done, The Sabban Group will look to expand further on the Bayat name and develop more projects of quality and affordability for the anticipating masses.