*Analysis - Abdulhamid Al-Omari
The total value of weekly deals for the local real estate market fell by 17.9 percent at the end of last week, compared to a weekly increase of 25.9%, to settle at the end of the week at the level of 3.8 billion riyals.
The value of weekly market transactions was affected by the decline in the value of residential sector transactions by 25.5% despite the weekly rise in the value of transactions in the commercial sector by 16.8%.
Current developments in the local real estate market, which have been significantly affected by the injection of high levels of mortgage lending for individuals, show a significant activity in the residential sector.
However, it began to be accompanied by higher market prices for residential land in particular, which, when it continues, will have negative short-term effects on the overall liquidity of the real estate market, which will bring it back to the severe recession that it has been trying to break out for more than four years.
That was also shown by the movements of liquidity within the real estate market during the recent period.
The average weekly value of real estate deals for residential villas during the year decreased, compared with the same period last year, reaching 18.3 per cent, which coincided with a significant decline in average market prices for residential villas over the past 12 months, reaching 10.3 per cent, which recorded a larger decline, compared to the average prices during the first quarter of 2019 with the same quarter last year, reaching 12.6 per cent.
However, the opposite was true of residential land for the same period, which saw a weekly average increase in the value of its transactions, which reached 36.2 per cent, compared to the average for the current year with the average of last year.
The average value of residential land in the last 12 months was 6.5% higher than the average of the first quarter of 2019 with 23.3% in the first quarter of last year.
This clearly indicates the return of speculation on residential land in particular, which will have very negative repercussions, and restore the situation of the local real estate market to square one on the level of the difficulty of ownership of housing and land by members of the community, which in turn requires the vigorous pursuit of more effective tools for the fight against land monopoly and speculation before the infection of inflation returns the market price of land to real estate, which is mainly available to the White Land Fee System that has been suspended since the middle of 2016 to date at the first stage of the system (white land not developed for areas of ten thousand and more).
At the same time, there is an urgent need for large pumping of mortgage loans into individuals' hands, as seen to date, with an annualized growth rate of 15.8 percent at the end of the last quarter of 2018 to settle at the end of the quarter at 154.7 billion riyals.
It is expected in conjunction with the active pace now to rise by the end of the current quarter to about 167.9 billion riyals, which is recording an annual growth of 21.4 percent, and according to current developments by the end of the year to reach record levels of 213 billion riyals, which translates into an annual growth rate of around 38 per cent in 2019 (i.e., over 58 billion riyals as real estate loans).
On another side of the performance indicators of the local real estate market, real estate investment funds (16 investment funds) is recording an average weekly performance of 0.1 per cent, compared to 3.6 percent in the previous week, with an average loss of 15.4 per cent at the end of last week (only two funds with a market price higher than the IPO price, as opposed to 14 real estate funds with market prices below the IPO price) with its net loss at the end of last week reaching SR 2.1 billion, compared to its capital at the time of the IPO.
The volume of banking facilities granted to these funds and Sukuk remains stable at SR 5.6 billion (40.7 per cent of its capital and 48.2 per cent of its market value) and the stability of the number of borrowed or issued real estate funds in nine of the 16 listed real estate investment funds.
Weekly performance of the real estate market
The local real estate market recorded its end of trading last week with a decline in the total value of its weekly transactions of 17.9 per cent, compared to a rise in the previous week by 25.9 per cent.
The total value of real estate transactions stabilized at the end of the 11th week of this year at the level of 3.8 billion riyals, compared with the previous level of 4.7 billion riyals.
The decline was mainly due to the large weekly decline in the value of housing transactions, which recorded a decline of 25.5%, compared to 27.9 percent in the previous week, with the housing sector settling at the end of last week at below SR2.9 billion riyals.
The value of transactions in the commercial sector increased by 16.8 per cent, compared with 17.5 percent in the previous week, to reach the level of 847 million riyals at the end of last week.
At the level of reading the rest of the weekly performance indicators of the real estate market, the number of real estate transactions fell by 3.4%
Compared with a weekly decline of 2.2 percent,
To settle at 6621 real estate.
The number of properties sold fell by 1.2 percent, compared to a previous weekly decline of 3.1 percent, to settle at 6995 selling real estate.
The two indicators that reflect the change, whether reversing the change in transaction values or lower if they are consistent in the same direction, that continue to lower the weighted average market prices of the various movable real estate assets.
This is very positive, which will strengthen its continuation (low prices, high deals and sales) from the exit of the local real estate market from the severe recession, which they are subject to for several years and in turn contributes to overcoming the difficulty of owning land and housing for members of society, under the umbrella of lower inflated prices of various real estate assets.
Real estate transactions recorded a weekly decline of 22.1 per cent compared to a 27.9 per cent rise in the previous week to 20.7 million square meters.
Land and real estate price trends
Short-term price trends, as shown by the changes in the last period of the current year for the average prices of land and residential properties, had an annual decline for all the average prices during the previous 12 months until March 14 of this year, compared to the same period last year except residential land.
The results are as follows: annual decline in the average price of residential apartments by 11.7%, and an annual decline in the average market prices of residential villas by 10.3%, while the average market price per square meter of residential land recorded an annual increase of 6.5 per cent.
The long-term price trends showed a decline in all average land and residential property prices until March 14 of this year, compared to the average annual market price of land and real estate for 2014 (peak property).
The results were as follows: the average market prices of residential villas decreased by 32.8%, and the average market price per square meter of residential land decreased during the comparison period by 28.2%, then the average price of apartments fell by 22.1%.