Saudi rental transactions jump as home sales fall on buyer caution

Money is showing up in Saudi Arabia’s rental market while sales activity cools. Rental transaction value rose 32% y-o-y to SAR 10.6 bn in August, on a 28% increase in residential rentals to SAR 5.6 bn and a 37% rise in non-residential rentals to SAR 5 bn. Sales transactions moved the other way, with value down 15% to SAR 24.4 bn, and volumes down 7% to a little over 24k, Argaam reports, citing Real Estate General Authority data.

Where the sales drop sits: Non-residential transactions fell 29% to SAR 6.5 bn, against an 8% decline in residential transactions to SAR 17.9 bn — still 73% of total value. Riyadh accounted for 38% of the month’s transaction value at SAR 9.3 bn, ahead of Makkah at SAR 7.2 bn and the Eastern Province at SAR 3.7 bn.

Buyers are hesitating, not disappearing: “The residential market remains more cautious than it was a year ago, with affordability continuing to influence purchasing decisions and prolonged regional uncertainty adding another layer of consideration for buyers,” Knight Frank Partner and head of research Faisal Durrani said in a press release. Demand deferred from purchase tends to land in rentals, which is where the pressure on housing costs in the August inflation data is already visible — actual rents were up 3.9% y-o-y.

The supply question: Slower sales alongside rising construction costs may affect the timing and viability of some projects, making announced supply an imperfect guide to what actually gets delivered, Knight Frank Regional Partner and head of consultancy Harmen De Jong said.

Read these numbers with a pinch of salt: One month of aggregate transaction value isn’t indicative in its own right. Vacancy rates, net absorption, effective rents, and cap rates are the metrics worth watching before any investment, leasing, or development call, commercial real estate advisor Ahmad Lahiq said.