RIYADH: Saudi Arabia’s capital witnessed a 7 percent rise in real estate transaction volumes in 2023 compared to the previous year, according to Knight Frank. Riyadh made this progress at a time when other cities in the Kingdom, which includes Jeddah and Dammam, saw a decline in transaction volumes by 21 percent and 12 percent, respectively. In its latest report, the UK-based agency revealed that overall transaction volumes in Saudi Arabia’s real estate sector fell by 17 percent in 2023 to just over 177,000. On the other hand, the total volume of all deals in the Kingdom declined by 9 percent to SR197.7 billion ($52.71 billion). However, on a positive note, the total value of residential transactions in Riyadh rose by 1 percent during 2023 to SR50.9 billion. The number of real estate deals in Saudi Arabia, which accounted for 58.7 percent of all by total value, registered a 16 percent fall to just under 150,000 sales. “The residential market has experienced phenomenal price growth over the last two to three years, with prices in Riyadh, for instance, continuing to climb into record-high territory,” said Faisal Durrani, partner, head of research for Knight Frank in the Middle East and North Africa region. He added: “Unsurprisingly, the high home values have contributed to growing affordability issues, which have been further exacerbated by the rising cost of borrowing. Indeed, interest rates have jumped from around 0.8 percent in January 2021 to 6 percent at the end of last year.” Durrani further noted that the residential sector in the Kingdom is witnessing a structural shift in demand. “Younger Saudis are delaying home ownership not only due to affordability considerations, but intra-Saudi migrants are preferentially seeking to rent, rather than own,” he explained. Knight Frank further pointed out that the total number of mortgages issued between January and November 2023 fell by 35 percent, compared to a decline of 22 percent over the same period in the previous year. Similarly, the total value of mortgages issued declined by 36 percent to SR74.2 billion during the same period as higher interest rates and prices move potential buyers into a longer holding pattern while they amass ever-increasing deposits. Unlike like the rest of the Kingdom, home values in Riyadh continued to climb in 2023 compared to the previous year. Apartment prices in Saudi Arabia’s capital went up 4.5 percent in 2023, compared to 2022, while villa values increased by 0.5 percent in the same period. “Riyadh sits at the center of the Kingdom’s economic activity. It’s where job creation rates are the highest, in large part driven by Program HQ which has seen 200 companies commit to establishing their regional headquarters in the Kingdom,” said Talal Raqqaban, partner, valuation, public-private partnership at Knight Frank. He added: “Even with 241,000 homes due to be delivered by 2030, the projected doubling of the population over this period to 16 million will still result in a housing shortfall of 1.5 million units.”