_How will the new Riyadh metro affect real estate values?
The Riyadh metro (176 km complemented with 24 new bus routes) will be operational in the coming 18 months and the impact on the city will be equally wide ranging in terms of social and economic development.
With Riyadh’s population set to grow from circa six million to eight million by 2030, the requirement for a mass transit system (MTS) seems clear, not only when placed in context of the city’s congested nature but given the rapid social reform that is underway in Saudi Arabia.
However, it is in relation to real estate dynamics and the ability to spur meaningful urban regeneration, where the Riyadh Metro will have a marked effect. Riyadh is defined as a real estate ecosystem that has no natural topographical restraints, as a result, a key question for owners and investors is how to maintain and grow asset value in light of a highly elastic supply dynamic.
Over the past decade or so Riyadh’s urban boundaries have rapidly increased as a result of low density development, mainly in the residential sector, which has hindered the ability for the market to show any signs of capital value growth.
The introduction of the metro may lead to a more permanent outer boundary for Riyadh, therefore areas that may have been classed secondary locations historically are set to become value creation hotspots.
"Over the medium to long term, the metro is expected to transform Riyadh for the better, improving the quality of life of local community, a central objective of the Kingdom’s leadership."
The buyer demand profile - which to date has been mismatched by inventory and new supply - has mainly taken the form of large villa accommodation. With demand shifting away from villa stock towards more affordable smaller units, mixed use urban regeneration around key metro hubs could respond to this growing market segment. This will also aid affordability given that this new cohort of demand will require home financing to gain access to the housing ladder. As social norms change within the Kingdom, the move away from the family home is coming earlier in each generation. Given the Kingdom’s young population dynamics, this only stresses the requirement for such stock.