The KSA 2020 Year In Review report by industry experts JLL has revealed that while Saudi Arabia’s real estate market - like much of the world - was affected by COVID-19, it was sheltered from the worst effects by confident government action. “While much of 2020 was prioritizing the response to COVID-19, Saudi Arabia remained focused on growth and stability, long-term economic sustainability, diversification and an enhanced quality of life for its people...Given the strong government support for the sector, demand for KSA’s residential properties remained active in 2020,” the report said.
THE EFFECT OF COVID-19 ON DIFFERENT SECTORS
Despite the residential market being largely protected from the worst effects of COVID-19, the retail sector was affected, according to JLL. The real estate experts said that it “ witnessed an immediate impact” from the impact of the 2020 pandemic, due to the movement restrictions caused by health policy directed at limiting the spread of the virus. “In addition, the increase in VAT levels and suspension of public sector allowances placed downward pressure on household incomes, leading to a prioritization of spending. This resulted in lower footfalls and in-store revenues. Average rental rates in super regional and regional malls declined by 5% and 10% in Riyadh and Jeddah respectively in Q4 2020 versus Q4 2019. Similarly, rental rates in Makkah and DMA decreased by 10% and 3%, respectively,” the report said.
More positively however, the office sector’s impact from the spread of the virus was “muted” across the key cities of Jeddah, Makkah, Riyadh and Dammam Metropolitan Area (DMA), according to JLL.
ROBUST GOVERNMENT POLICY
The report stressed that government action had been key to the country’s real estate industry not suffering the worst effects of the virus’ market impact. “Even though there are sectors in KSA’s property market which remain challenged as a result of COVID-19, the government is looking beyond the implications of the pandemic by continuing to support a number of measures and by investing massively in various projects to achieve its Vision 2030 goals,” said Dana Salbak, Head of Research MENA at JLL.
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