Property experts expect Saudi Arabia’s real estate sector to hit new highs over the next three years. Several economic, legislative and financial factors will contribute to the continuing boom. The estimated growth rate of fixed capital stock is 45-55% from 2005 – 2007, following the sharp increase in the Saudi Arabia’s GDP from £5.5 billion in the year 2000 – up to almost £8 billion currently. Annual property transactions are worth £26.5 billion and investments of more than more than £159 million.
The primary cause is rising oil prices, reaching an all-time-high of $102 per barrel, generating strong liquidity and fueling the real estate market.
The Saudi government’s is spending large amounts on basic infrastructure and residential projects for low-income segments in order to meet the rising growth in population in major cities, put at 4% per annum. The Saudi government has seen the needs of a growing, young, urban population and is no longer focusing soleley on luxury villas and palaces. Statistics show that up to 60 percent of the total population is in need of around 1.2 million residential units over the coming period, with this number likely to increase to around 2.9 million over the next twenty years.
Saudi Arabia’s population is the largest in the Gulf and current demand for housing is far outstripping supply. The capital Riyadh contains the largest population Kingdom-wide, estimated at 23 % of the total population, followed by Makkah at 24% then the Eastern Zone at 14%.
A fluctuating stock market combined with an inability to reap enough profits are forcing investors to shift their businesses to alternative markets – primarily the mid-level income housing market. Official figures released confirm a large upswing in the total liquidity available on the local market for investment, plus a considerable increase in foreign investments – particularly from neighboring Gulf states.
Kuwaitis rank first in Saudi real estate investments, then the Bahrainis followed by Qataris, while UAE investments come last. Omanis have been remarkably absent from the Saudi market over the past period. The Saudi property boom also owes a great deal to relatively lower risk levels and more realistic growth levels compared to the UAE. Demand is expected to increase on the housing market over the coming period with the approaching implementation of the Common Gulf Market, declared in Doha.
The report also underscores a remarkable development in Saudi legislative system; a fact which the report says is verified by the establishment of economic zones and cities that have drawn in large investments into the market, with businessmen being encouraged by additional incentives and exceptional privileges in terms of the entry and exit of laborers, businessmen and investors. Saudi is still in the process of improving its property legislation to further attract more foreign investment.
A recent project, the King Abdullah Economic City will be a multi-stage development with construction having started in 2005. This mega project will closely integrate itself into the Kingdom’s ongoing drive to expand the economy, create employment opportunities for its young population and function as a catalyst to attract foreign investment, global trade, commerce and industry. Based on initial forecasts, the project and its several components will create up to one 1,000,000 job opportunities in the various industries and service-based companies that will open in the City.
