Real estate prices rise up to 90% in Riyad, Saudi Arabia

Real estate prices in Riyadh have increased by 40 to 90 percent in recent months, but analysts said property prices in the Kingdom were still the lowest compared to neighboring GCC countries.

The analysts attributed the increase in prices to growing demand for real estate following repatriation of Saudi funds from abroad. Many Saudis favor real estate being a secure investment.

The price for a square-meter of land in the capital ranges between SR400 and SR4,000 while building costs range between SR1,000 and SR2,500 per square meter, Al-Eqtisadiah Arabic daily said. “Many Saudis have shown interest in real estate lately following recurrent fluctuations in the Saudi bourse,” one analyst said.

Suleiman Al-Amri, chairman of a real estate company, said he believed that real estate prices in the Kingdom were much lower compared to neighboring countries. “This indicates that real estate prices in the Kingdom are still normal,” he added.

Al-Amri spoke about growing prospects for investment in real estate in Riyadh as 70 percent of Saudis living in the city still do not own a house. “This situation will increase demand for real estate for building houses,” he added.

He also called for suitable solutions for housing problems in the country. “Rules and regulations should support investment in the sector,” he added.

Al-Amri said prices of real estate in some areas of Riyadh have increased by 90 percent. “This is really frightening.”

He stressed the need for more companies to build housing units. “Many people are still seeking villas and flats instead of purchasing land,” he pointed out.

Abdul Aziz Al-Jaad, a member of the real estate committee at the Riyadh Chamber of Commerce and Industry, also agreed that real estate prices in the city were rising gradually as a result of demand.

“Real estate owners are now selling land to developers rather than individuals,” he said.

Al-Jaad said the tremendous hike in prices would discourage many Saudis from purchasing land. “They will wait until the prices come down,” he added.

Ali Al-Fowzan, director general of a real estate office, said there is big demand for real estate to construct houses, offices and other projects. “The increase in real estate prices could be found all over the Kingdom, not in Riyadh alone,” he said and cited increasing liquidity as one of the major reasons for price hikes. The hike in real estate prices has also reflected in rents for offices in Riyadh and other parts of the country.

Many small businesses have been closed down as a result of a 35 percent increase in rents as their owners thought it was better to close than suffering losses.

Many traders have protested the high increase in rents but Khaled Al-Salman, a real estate developer in Jeddah, defended the move, saying construction cost had gone up 25 percent. He expected more demand for showrooms and office rooms.

Saad Al-Abdullatif, owner of a computer repair shop in Dammam, said he decided to close his present shop when the real estate owner increased rents from SR25,000 to SR32,000. “I am now looking for another showroom at a lesser rent.”

Arab News

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U.S. housing price declines may reach 20% by 2009, PMI says

U.S. housing price declines will probably double to a national average of 20 percent by next year, according to a report from PMI Group Inc., the second-largest mortgage insurer.

The drop from the mid-2006 peak won't be evenly distributed, according to PMI's market risk index, published today by the Walnut Creek, California-based company in its quarterly real estate trends report. Metropolitan areas where home prices are most likely to be lower are all in California, Florida, Arizona and Nevada.

"The decline in house prices is only about one-third to one-half over, due primarily to the magnitude of the supply/demand imbalance," David Berson, PMI's chief economist, wrote in the report. "That assumes that the current economic downturn is both short and modest," said Berson, who previously was chief economist at Fannie Mae, the world's largest mortgage finance company.

The price decline from 2006 is measured by the S&P/Case- Shiller home-price index which covers 20 metropolitan areas. The supply of single-family homes for sale is the highest in more than 20 years, Berson said.

There's a 93 percent likelihood of lower prices in the Riverside-San Bernardino, California area, followed by Las Vegas, at 91 percent, according to PMI's model. Orlando and Fort Lauderdale, Florida and Phoenix, Arizona round out the top five.

Metropolitan areas where values are most likely to hold up are the central and southern U.S. They include Dallas, Houston and Fort Worth, in Texas; Cleveland and Columbus, Ohio; and Memphis, Tennessee and Charlotte, North Carolina, with less than a 1 percent chance of lower prices in two years.

PMI insures lenders against borrowers who fail to repay their loans.

Bloomberg

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New Zealand house sales drop 53% to a seven-year low

New Zealand house sales slumped to a seven-year low in March, adding to signs record-high interest rates are cooling the property market and will slow economic growth.

The number of homes sold dropped 53 percent to 5,129 last month from 10,989 a year earlier, according to a report today from the Real Estate Institute of New Zealand Inc. e-mailed to Bloomberg News. Sales were the lowest since January 2001.

Finance Minister Michael Cullen said he couldn't rule out a recession this year because of weakness in the property market, a drought and turmoil on global financial markets. Falling consumer confidence and the weak housing market will prompt Reserve Bank of New Zealand Governor Alan Bollard to cut the benchmark interest rate at 8.25 percent this year, according to 7 of 12 economists surveyed by Bloomberg News.

"We see a risk of house prices dropping by more than the Reserve Bank currently forecasts," said Nick Tuffley, chief economist at ASB Bank Ltd. in Auckland. "There is a glut of supply and the mechanisms to reduce that are weaker prices or sellers withdrawing from the market."

The central bank forecast last month that prices will fall 3.9 percent in the year ending Sept. 30, the first decline in since 2000. Bollard said a "sharp slowdown" in the housing market was spilling over into consumer spending.

Economic growth may slow to 1.7 percent this year from 3.1 percent in 2007, according to a median forecast of 12 economists surveyed by Bloomberg News.

Consumer Confidence

Consumer confidence fell to a 10-year low in the first quarter, according to survey by Westpac Banking Corp. and McDermott Miller Ltd.

"There is no doubt confidence has taken a knock," Murray Cleland, national president of the Real Estate Institute, said in a statement. "The balance of probability is that the property market will weaken in coming months."

A four-day Easter vacation in March may have contributed to the decline in sales, he said.

The median house price rose for the first time in four months in March because sales volumes of high-priced homes didn't drop as much as cheaper houses, Cleland said.

The median price rose to NZ$349,000 ($278,188) from NZ$337,500 in February. Prices gained 1.6 percent from a year earlier.

The median time it took to sell a house was 40 days, compared with 27 days a year earlier and 50 days in February.

Bloomberg

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