Long waiting lists for housing compounds, double-digit rent increases are the norm
RIYADH (Reuters) — The message boards of online expat forums in Saudi Arabia tell their own story: increasingly frantic enquiries from new arrivals looking for somewhere to live in a very tight market.
"Help! I can't find anywhere to live. All the housing managers just tell me their waiting lists are months and months long," posted a British man seeking a home for his family.
Expatriates moving to Riyadh, the capital of the Middle East's largest economy, face long waits for places in housing compounds where rents have risen by more than 10 per cent a year for the past four years, according to property consultants Jones Lang LaSalle.
Most better-paid expatriates choose to live in compounds because they offer better safety against possible militant attacks and to escape Saudi Arabia's stringent Islamic regulations on public behaviour.
However, a pause in housing investment after militant attacks on foreigners between 2003 and 2005 coupled with a subsequent surge in expatriate arrivals as the economy boomed and a broader rise in land prices have caused a severe shortage.
Now, with rents in the more expensive compounds topping 250,000 riyals ($66,000 Cdn) a year for a three-bedroom villa, property developers are moving to exploit a booming market with several large new projects.
Compound housing availability in Riyadh will increase by 50 per cent in the next two years, with 3,000 units expected to hit the market, estimates John Harris, Saudi Arabia director at Jones Lang LaSalle.
"It has become a real challenge for expats to find a place to live on their budget," he said. "We're going to see a substantial amount of compound supply coming on stream, which will relieve the pressure somewhat. But there's obviously a huge backlog of demand."
Most of the new additions to Riyadh's compound housing are priced at the higher end of the spectrum, said Harris, while much of the demand was for less-expensive housing in the 100,000-200,000 ($26,000 to $53,000) bracket.
"I'm not sure whether the new compounds will fill the demand. Most of them will be 200,000 riyals ($53,000) plus a year. The majority of the market cannot afford those prices," said Peter Haworth-Lees, co-owner of the new mid-priced Riyadh Village Compound, built on the site of an older abandoned compound on the far eastern edge of the city.
Western lifestyle
Saudi Arabia, the birthplace of Islam, follows the austere Wahhabi school of Islam and imposes pervasive restrictions on public behaviour.
The worship of other religions is confined to private spaces; women are barred from driving and must cover their bodies in voluminous black robes; it is forbidden for unrelated members of the opposite sex to mix; and alcohol is prohibited.
However, with nine in 10 private sector jobs in the world's biggest oil exporter held by foreigners, compounds make it possible for expatriates to follow more or less Western lifestyles within their immediate neighbourhood.
Hidden from view behind high walls topped with barbed wire, most compounds boast swimming pools, restaurants, shops, cafes, tennis courts and other leisure amenities.
Saudis, including the morality police who patrol city streets, are not allowed to enter because conservative clerics fear Westernizing influences are corrupting.
With rents so high, some expatriates prefer to live in the city, where they can rent a much more spacious three-bedroom villa than in a compound for only around 80,000 riyals ($21,000) a year.
However, the social restrictions, particularly for women, can make it tough for families.
"It was pretty miserable. We didn't know anyone and couldn't interact with the neighbours at all. Mobility becomes a huge issue for women," said a Pakistani woman who lived in an apartment with her husband — a banker — and two small children before moving into a compound two years ago.
The city's expatriate population has taken time to recover from attacks a decade ago, discouraging luxury home building.
On the night of May 12, 2003, al Qaeda militants attacked three expatriate compounds in Riyadh, killing 35 people. Another attack on a compound that November, and two more the following May, left a further 20 dead.
The impact on Western workers in the kingdom was immediate — an exodus to Dubai, Bahrain and other neighbouring business centres.
Security at compounds was put in the hands of the Saudi Arabian National Guard, which now man the main entrances and patrol the perimeters, themselves guarded by high walls, barbed wire and blast-proof concrete blocks.
"The confidence went out of the market for Saudi investors so nobody was building. Everybody was downscaling. People were getting out of the business and there was a big risk involved," Howarth-Lees said.
New capacity
Spurred by high oil prices and deregulation in some key sectors like finance, Saudi Arabia's economy has surged in recent years, recording growth in gross domestic product of 7.1 per cent last year.
Security has also improved, with only one militant attack on foreigners inside the kingdom since 2006. As business boomed, expatriates started to return in large numbers.
At Eid Villas, one of Riyadh's premium compounds, there is a waiting list with more than 300 names for housing that includes two-bedroom villas priced for rent a t 190,000 riyals ($50,000) a year and three-bedroom villas that range from 250,000-290,000 ($66,000 to $76,000) riyals a year.
"There are a number of factors that make it hard to deploy people in this market, but availability of housing is a main one," Harris said.
Howarth-Lees, who moved into the compound business after running a comedy club in Riyadh and has lived in Saudi Arabia for 15 years, is offering three-bedroom houses in Riyadh Village for 175,000 riyals ($46,000) a year.
Other new projects in the city such as the new King Abdullah Economic City, a financial district being constructed by Dubai developer Emaar and local investors in northwest Riyadh, which includes 1,200 residential units, could also help ease the bottleneck in the expatriate housing market.
Howarth-Lees, however, sees no quick solution for the rising number of expats heading to the Saudi capital.
"When the economy starts to flatten out and projects like the financial district are completed, then prices will settle down, or at least plateau. But I think they will remain high for the next five years," he said.
