Home rents ‘to rise this year’

JEDDAH: Rents for houses and apartments are set to rise over the next six months, with stability likely only in 2017 when the government’s units come onto the market, a local expert said recently. “Given the effect of the 30 percent mortgage law and our analysis of the rental market in Q1, which saw rents increase across the residential market, specifically for apartments, we expect that rents will continue to rise over the remaining six months of 2015,” said Jamil Ghaznawi, national director and country head of Jones Lang LaSalle in the Kingdom. Ghaznawi said the scheduled completion of 15,000 units by the Housing Ministry in 2017 would substantially increase supply of affordable housing for ownership in Jeddah. This would reduce demand for rental stock and consequently stabilize or see a drop in prices, he said. However, he said this would depend on the ministry delivering these units. “We expect that there will be delays in the delivery of the majority of those units as the three developments in Jeddah are still in the early phases of construction,” he said. Ghaznawi said that if the ministry brings these units onto the market gradually, which is expected, and the effects of the 30 percent mortgage law continue, then rents would likely increase in the short term and stabilize by 2017, he said. Offering a different view, Abdullah Al-Ahmari, chairman of the real estate appraisal committee at the Jeddah Chamber of Commerce and Industry, said there was a large supply of housing units for rent, which indicated that prices would fall. “We expect rents to fall by 15 percent gradually over the next two years. If the Ministry of Housing hands over more than 15,000 housing units for citizens as per schedule by 2017, the rents in Jeddah would fall at a greater pace,” Al-Ahmari said. He said the government plans to rein in arbitrary rent increases with several measures, including plans to introduce a standard rent contract. Residential stock in Jeddah stood at around 775,000 units with around 6,000 units completed during the first quarter this year. Sale prices have increased at a lower rate during the first quarter, according to Jones Lang LaSalle’s Jeddah Residential Market Overview. Rents have risen 7.5 percent more than sale prices in the apartment sector, reflecting the benefit to this sector from the new mortgage regulations. Residential transactions registered by the government have substantially decreased over the last quarter as a result of the 30 percent mortgage law and falling oil prices. Sales of villas and apartments have dropped by 59 percent and 27 percent respectively since the implementation of the mortgage regulations in November 2014. -arabnews