As the only major city in the Kingdom of Saudi Arabia to see an increase, Mecca’s residential sales activity is up by 12% in the first half of the year compared with the same period last year. Interest from buyers has increased as a result of land prices in Mecca dropping, according to JLL. 

Another factor increasing the market is Saudi Arabia’s lifting of the quota of Hajj pilgrims, despite major infrastructure works on the Grand Mosque. Saudi Arabia's Haj and Umrah Ministry extended the Umrah season by a month to allow more time for Muslims across the world to perform the ritual, with the Umrah season to now end on the 15th of Shawwal instead of the 15th of Ramazan. Government numbers show more Umrah pilgrims’ visa issuances up 5 percent to 6.7 million compared with last year’s Umrah season.
“The rising number of pilgrims can be attributed to the partial completion of the Holy Mosque expansion, and extending the Umrah season by an additional month,” JLL said in its report.

The quota had been cut by 20% for both domestic and foreign pilgrims, and the number of people allowed to perform Hajj was reduced by 50 per cent after the Hajj tragedy of 2015 when more than 700 lives were lost as 2 million people converged in the Holy City of Mecca. Crown Prince Muhammad Bin Naif, Deputy Premier and Minister of Interior has proposed to restore the quota, and the Minister of Hajj and Umrah, Mohammed Saleh Bantan said "the authorities have made preparations to receive the additional number of pilgrims for the forthcoming Hajj”. Meanwhile, visa fees for Umrah and second-time Hajj pilgrims has increased to SAR2,000. Egyptians, the highest population of Umrah pilgrims, may find it increasingly unaffordable as the liberalisation of the Egyptian Pound against a strengthening Saudi Riyal may have a negative impact on the market outside of the Hajj season.

Mecca’s retail and hotel sectors, particularly those located centrally and near the holy sites, typically see an increase in business activity during the pilgrimage season. During the first half of this year, an additional 7,000 square metres of retail space entered the Mecca property market plus there were 1,900 keys added in the area’s hotel sector, 783 from the Hilton Mecca Convention Hotel alone. And while the rent for retail space in shopping centres and community centres remain unchanged, rates in Markazia decreased by 7.5 percent during the period. Office space also decreased by 5 per cent from the same period last year to SR605, but vacancy rates fell from 19 percent to 16 percent. The emphasis for new development is hospitality and pilgrim accommodation more than retail and residential components. New construction of the Haramain High Speed Railway and the New King Abdulaziz International Airport will help to increase visitors. 

Artist's impression of New King Abdulaziz International Airport​- Image credit jed-airport.com

On the residential side, prices for apartments in Mecca increased by around 3.1 percent over the first half of 2017, according to JLL's H1 2017 Mecca Real Estate Market Overview report. Villas also increased by 5 percent. The Ministry of Justice showed an increase in residential transactions over the first half of the year by about 12 percent, JLL said.

The supply of residential units in Mecca increased to 379,000 units in the first half of 2017, up 3,000 units more than the past six months. The most recent addition to the market is the second phase of Wahat Makkah, with affordable units which delivered 1,300 units. Developers Al Balad Al Ameen, plan to develop 1,600 more units over the next several years, and the Jabal Omar Development will also provide approximately 200 apartments in that time frame. Urban boundaries have been extended from the Fourth Ring Road on the North to the Fifth Ring Road in the South and between the Fourth Ring Road West to East, providing more undeveloped land designated for residential and commercial use.

To read the full JLL report, click the link below.

See also:

Buying a property in Saudi Arabia

The tide of UAE building projects dramatically increases

Cavendish Maxwell release Q2 2017 Dubai and Abu Dhabi Residential Reports