Saudi villa prices rise 20 pct in H1 2011 -report

Prices for villas in Saudi Arabia rose 20.5 percent on average in the first half of the year from the second half of 2010, with values seen rising further in the short-to-medium term, Banque Saudi Fransi said in a report.

Villa rents gained nearly 11 percent in parts of Riyadh and Jeddah while apartments rose "modestly" and land prices were up 4.8 percent on average throughout the kingdom, the report said.

Saudi Arabia, the biggest Arab economy, is facing a massive housing problem due to rapid population growth and an inflow of expatriate workers coming to the kingdom which is rolling out a $400 billion infrastructure spending plan.

"The mismatch between supply and demand, particularly for smaller villas, will be a key challenge for state and private sector investors to address in the coming years," the report said.

"The prospect of an onslaught of new units being added to the market is likely to lead many Saudis to put off plans to buy properties for a year or two in anticipation that prices would stabilise or fall."

The bank said the average 1.28 million riyal price ($341,300) for a small villa in the kingdom would be too high for most young Saudis who are expected to opt instead for cheaper large apartments.

Economists and experts say that between 30 and 50 percent of Saudis own homes, but the majority of young Saudis do not.

Saudi Arabia needs 1.65 million new homes by 2015 to meet growing demand in the world's largest oil exporter, the bank said earlier this year. 

Property consultancy Jones Lang LaSalle said in March it expects rents and land prices to rise by 10 percent each year until 2014. 

Faced with a housing shortage, Saudi King Abdullah in March pledged 250 billion Saudi riyals to be spent on 500,000 new homes.

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