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GLOBAL PROPERTY REVIEW

November 19, 2018

Jeddah 

Saudi Arabia's second biggest city has seen a soft real estate market so far in 2018, with little uptick in demand across residential and the office sectors.

Sales prices and rents continued to decline in the third quarter of this year, research by Jones Lang LaSalle found. This is a continuation of earlier periods - the Jeddah Real Estate Market Overview from JLL for Q1 saw rents fall 9 per cent. Vacancies increased following a departure of expatriates over the previous year, largely attributed to low oil prices.

However, the 817,000 units of residential supply in Q3 was just a touch above the 800,000 from Q1, as a result of few new completions between the two periods, including none for Q3. As such, tenants and prospective buyers have the upper hand in negotiation, with a range of apartments and villas from the last few years of completions. Authorities will rely on the Saudi Real Estate Reliance Company, a semi-government home lender, to provide further finance options to citizens. 

Falling rents were also in evidence in the office sector, as vacancies rose. Further softening is expected due to an extra 1.05 million square metres of office supply coming to the market.

However, the city is investing wisely in infrastructure to build a foundation of future growth, particularly in transport. The long-awaited Haramain High-Speed Railway completed its first journey, which connects to Makkah and Medina.

Indeed, the proximity to the Holy Cities is a significant plus point as a tourist destination. The hotel sector was set to have the strongest August on record, according to industry analysts STR.

 

…………

Boston 

Like the country's capital, Boston has seen modest price rises this year – it is presently one of the most expensive cities in the world in terms of living costs, mortgages and rents. 

Not bad for the long term investor landlord, though yield compression is in evidence.

The median rent for a one-bedroom in the city rose just over 9 per cent to $2,400 per month for October, according to Zumper, the listings site. A median two-bed was $2,700, up 3.4 per cent on last year.

Indeed, despite ongoing construction and government assistance for affordable housing, the city is one of the most expensive in the country to be a renter.

Sales prices have been a mixed bag this year, however, with modest gains, some falls for some property types but overall stability. The 22 districts are greatly various for a standard product such as a condominium. Areas such as Bay Village, Brighton and Allston have seen price-per-square-foot rise between 30 per cent and 119 per cent for Q3 against last year. Beacon Hill is down 16 per cent and Downtown less almost 7 per cent over 12 months, according to The Warren Report: Condo Edition. 

Higher general living costs have been attributed for the slow in price gains, pushing some would-be buyers onto the sidelines until prices soften. Indeed, while house prices nationwide have not reduced overall this year, the rate of increase has slowed, as has the degree of negotiability. Repayments are rising on variable-rate mortgages.

House and condo sales in July may have risen 6 per cent on last year (Greater Boston Association of Realtors), but a turning point may have been reached. 

 

……………….

Mexico City

The Mexican capital has broadly seen year-on-year price growth, with supply falling far short of demand from both singletons and families. 

Real estate firm Softec found that a house bought for 1.5 million pesos in 2008 is worth around 4 million pesos today. This is attributed not only to a swelling population, but increasingly tight construction rules that put a premium on land plots and construction types.

Larger cities valid for comparison - such as Monterray and Guadalajara - have seen property prices remain relatively flat over the decade by comparison. It is clear that Mexico City is a major pull for companies and young people, domestic and international.

New rules on building, however, make it near impossible for new houses to be priced at less than 1 million pesos.  

But innovation is around the corner, in the form of what is called multi-family accommodation, purpose-built apartment blocks. All three cities have been the focus of a US$300 million investment scheme by CCLA and GIC, the Singapore sovereign wealth fund, as an example of the money flowing in.

Couples and young families have traditionally rented in condominiums. Renter rules were broadly in their favour, and the investor secured decent rental yield. But this much needed development type is set to absorb some of the latent demand in the city. To put it in context, while Mexico City rolls out around 15,000 new homes each year, demand is closer to 65,000.

Rents are around 11,000 peso per month in the city centre, compared to an average 6,412 pesos per month, data from Numbeo found. The price per square metre is 45,500 pesos, compared to around 27,400 pesos on the outskirts, the same source found.

 

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