Analysis - Abdul Hamid Al-Omari
The local real estate market ended its trading in February 2019 at an annualized increase of 14.6 per cent to settle at the end of the month at the level of 13.8 billion riyals, compared to the level of the same month last year at 12.0 billion riyals.
Despite the recent improvement in market liquidity levels due to the real decline in real estate prices and the increase in the volume of real estate finance granted to individuals during the last quarter of last year by 6.3 per cent, the market liquidity levels are still far from record levels recorded during the past years, compared to the same month of 2017 (16.0 billion riyals) by 14.0 per cent and a record low compared to the same month of 2013 and 2014 by 64.9 per cent (SAR 39.3 billion for February 2013), and 61.9 percent (SR 36.2 billion for February 2014).
There is an increase in the total value of real estate transactions during the first two months of this year, compared to the period of last year to 18.9 per cent, to settle at the end of the same period at the level of 32.6 billion riyals, compared with 27.4 per cent in the same period last year, while it is still below the peak levels recorded by the market (SR 76.3 billion for the first two months of 2014) with a decline of 57.3 per cent.
In another aspect of local real estate market performance indicators, real estate investment funds (16 investment funds) returned to the decline with an average weekly performance of 0.8 per cent, compared with 0.8 percent in the previous week, with an average loss of 18.3 per cent at the end of last week (Only two funds with a market price higher than the subscription price, as opposed to 14 real estate funds with market prices lower than the subscription price).
The net loss of the bank's capital losses reached SR 2.5 billion at the end of last week, compared with its capital at the time of the offering.
While the volume of banking facilities granted to these funds and Sukuk issuers stabilized at SR 5.6 billion (40.7 per cent of its capital, 49.9 per cent of its market value) and the stability of the number of real estates borrowed or issued Sukuk in nine funds out of 16 real estate investment funds in circulation.
Monthly performance of the real estate market
The largest increase in the month was in favor of housing transactions, which reached 18.2% to settle at 10.5 billion riyals, compared to the level of the same month last year at 8.9 billion riyals.
While the value of transactions of the commercial sector for the same period by 4.3% to stabilize at the level of 3.2 billion riyals, compared with the level of the same month last year at 8.9 billion riyals.
The rise in the total value of real estate transactions coincided with a sharp increase in the number of properties sold, with an annualized rise of 50.4 per cent to settle at 27.1 thousand properties at the end of the month.
The residential sector accounted for the highest annualized increase in real estate sold during the month, which reached 53.0% at the end of the month, stabling at 24.2 thousand sold properties.
While the percentage of real estate sold to the commercial sector for the same period was about 31.3 percent, stabled at the end of the month below the level of 2.9 thousand properties sold.
The improvement in real estate transaction values and the greatest improvement in the number of properties sold was a natural and expected result of the significant decline in the market prices of various real estate assets over the past three years, which ranged from 20 per cent to 30 per cent.
This is a clear indicator when comparing the two increases in the value of real estate transactions and the number of properties sold during the first two months of this year, which came in favor of transaction value by 18.9%, which is in favor of the number of properties sold to a record rate of 63.4%.
The value of transactions for the residential sector, which reflects a large part of the value of the sold real estate (the result of dividing the value of transactions on real estate numbers) during the comparison period, which during the first two months of this year amounted to a rate of 441 riyals per property (the value of real estate transactions 32.6 billion riyals, compared to 57.6 thousand sold properties), compared to a rate of 583 riyals per property for the same period last year (Value of real estate transactions is 27.4 billion riyals, compared with 35.3 thousand sold properties) with a decrease of 24.4 per cent in just one year.
Weekly performance of the real estate market
The local real estate market continued for the second week in a row recording low levels in the value of its deals, as the total value of real estate transactions fell last week by 14.4 per cent, compared to a decline of 7.0% in the previous week.
The total value of real estate transactions stabilized at the end of the ninth week of this year, which is below the level of 3.0 billion riyals, compared with the previous level at 3.5 billion riyals, with reference to the failure to update the site of the Ministry of Justice for real estate transactions for transactions last day of last week until the date of preparation of this report, which will certainly publish a change in those ratios and levels.
The decline in the value of real estate transactions included both the residential and commercial sectors, as the total value of residential sector transactions fell by 13.7 percent compared to the previous week to settle the housing sector transactions with the end of last week at the level of 2.3 billion riyals.
While the total value of transactions in the commercial sector decreased by 16.9 per cent, compared to a 26.2 percent drop in the previous week, with the trade sector closing at the level of 638 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 decreased by 20.1%, compared to its previous weekly rise of 2.7 percent, to settle at 5563 real estate deal.
The number of sold properties fell by 20.1 percent, compared to a previous weekly rise of 3.8 percent, to settle at 5796 selling properties, which reflect the change in both the reversal of the change in the value of transactions or in lower rates if they are consistent in the same direction.
The continued decline in the inflated market prices of the various movable real estate assets is very positive that will enhance its continuation (lower prices, higher deals and sales) from the exit of the local real estate market from the severe recession that is subject to several years, and in turn contributes to the exit from the crisis of the difficulty of land and housing ownership for members of society, under the umbrella of falling inflated prices for various real estate assets.
Real estate transactions recorded a weekly decline of 11.6 per cent, compared to a 14.5 per cent, with a rise in the previous week to 18.0 million square meters.
Land and real estate price trends
Short-term price trends showed changes in the last period of this year to the average prices of land and residential properties, with an annual decline for all the average prices during the previous twelve months until the end of February of this year, compared to the same period last year except residential land.
The results are as follows: the annual decline of the average price of apartments was by 12.4%, then an annual decline of the average market price of residential villas by 11.3%, and the average market price per square meter of residential land recorded an annual increase of 3.5 per cent.
The long-term price trends showed a decline in all average land and residential property prices by the end of February this year, compared to the average annual market price of land and real estate for 2014 (peak property).
The results are as follows: the average market price of residential villas decreased by 32.0 per cent, the average market price per square meter of residential land during the comparison period decreased by 30.1 per cent, and then the average price of apartments fell by 21.4%.