Saudi Arabia, March 18, 2019: Knight Frank is pleased to announce the release of the inaugural edition of Urban Futures, a report which tackles the increasingly prominent global topic of housing affordability and discusses how cities are looking to alleviate affordability pressures. For the first issue the focus has been put on six cities which have been at the forefront of the affordability debate. A spotlight has been included on Riyadh, where we have seen affordability come to the forefront of the agenda particularly as cultural and social attitudes change at a rapid pace.
In the report, 32 cities around the world were assessed and ranked based on a Global Affordability Monitor to understand the scale of the affordability challenge in each one of them. Three important elements were taken into account in the assessment including: house price to income ratio, rent as a proportion of income and historical real house price growth compared to real income growth.
The Knight Frank global affordability monitor results:
Raya Majdalani, Research Manager at Knight Frank Middle East commented: “City-wide average affordability statistics are useful but they fail to highlight disparities in housing costs within sub-markets or across the income spectrum. Therefore, even cities in the ‘most affordable’ quadrant still have room for improvement and may not be affordable to lower income groups. The case of Riyadh illustrates well the fact that ‘affordability is relative’. In fact, the challenge entailed by housing affordability is growing despite the city’s presence in the ‘most affordable’ quadrant status.”
Key headlines about Riyadh from the report include:
- Despite the alleviating affordability pressures triggered by declining house prices over the past few years and the city’s ‘most affordable’ quadrant status, housing affordability is a growing challenge in Riyadh.
- Fast urbanisation across Saudi Arabia over the past decades has put significant pressures on housing markets in urban centers. The issue of affordability is set to exacerbate as more and more people congregates in cities to access greater opportunities.
- The multi-generational household salaries helps mask the affordability issue not only in Riyadh but the wider Kingdom. If we consider average salaries rather than multi-generational household salaries, the affordability of Riyadh’s residential market changes dramatically.
- The Ministry of Housing is taking initiatives to respond to affordability pressures and get Saudi residents on the property ladder. The ambitious Sakani program scheme is a case in point.
- To ensure longevity and future value creation of affordable housing schemes, components that create a synergistic ecosystem must be included such as education, healthcare and recreation.
- The inclusion of healthcare and education assets in Riyadh would create value for the population residing in these areas in the long run and would have a direct impact on the socio-economic environment by creating employment.
- High requirements for private sector investments in education and healthcare are supported by the government initiatives under the National Transformation Plan.
Shehzad Jamal, Partner Healthcare & Education at Knight Frank Middle East commented: “Affordable housing schemes are best developed alongside typologies with varying socioeconomic profiles. We believe healthcare and education assets provide an excellent opportunity for cities to partner with the private sector to both service their communities and build economically diverse neighbourhoods.”