RIYADH: The ongoing conflict in the Middle East threatens to undermine sovereign credit ratings across the region if it escalates, according to S&P Global. 

The agency warned that increased instability could impact regional governments’ economic outlook and financial stability, with broader implications for creditworthiness depending on the conflict’s trajectory. 

While the immediate effects have been largely contained to specific areas, there are growing concerns that prolonged geopolitical tensions could lead to broader economic disruption across the region, it added. 

“So far, the sovereign credit impact of the conflict has been confined to the two rated sovereigns directly involved in the conflict: Israel and Lebanon. However, we now foresee several potential pathways via which the conflict could have a more material credit impact on the rest of the region,” said S&P Global. 

Its rating on Israel is now two notches lower than on Oct. 7, 2023, reflecting weaker fiscal and growth expectations through 2025, along with significantly heightened security risks. 

The agency also indicated that, although Lebanon remains in default, its economic and recovery prospects have further deteriorated. 

The report said that key areas of vulnerability include energy prices, trade route security, and capital flows, all of which could face heightened pressure if the conflict continues into 2025 as expected. 

The agency also said that the persistent uncertainty is likely to weigh on investor confidence, potentially leading to capital outflows and increased volatility in regional markets. 

While the geopolitical tensions have so far had a limited direct impact on the credit metrics of most Middle Eastern sovereigns, S&P said the potential for wider regional economic stress is growing. 

The conflict could affect key economic indicators such as growth, tourism revenues, remittances, and fiscal balances, depending on how the situation evolves. 

Countries more dependent on stable energy prices or vulnerable to trade disruptions, such as energy importers, could face more pronounced fiscal risks, while oil exporters in the Gulf may benefit from rising oil prices in the short term, it added. 

“Such trade disruptions could be a key challenge for the region, with the potential to increase oil prices and pose fiscal risks to energy importers, although higher oil prices could mitigate the risk for Gulf exporters particularly if the risks of export routes being blocked or oil production facilities being disrupted, remain contained,” added S&P. 

It said sovereign credit ratings in the region are already factoring in elements of geopolitical risk, but the current conflict could amplify these risks and lead to further rating downgrades. 

“Further, we now view the conflict as more complex and unpredictable and consider it more likely to persist well into 2025, with potentially lingering aftereffects,” added S&P. 

RIYADH: Saudi Arabia’s residential market witnessed a 51.6 percent surge in transactions in Riyadh over the year to the end of the second quarter of 2024, a new analysis showed, as the sector continues its robust growth. 

According to a report by real estate services firm CBRE, the capital city recorded 18,500 sales valued at SR26.6 billion ($7.08 billion) during this period, and the Kingdom’s residential market is set for further growth, fueled by population increases and government-backed investment projects. 

Jeddah also experienced a significant rise in transaction volumes, rising 43.2 percent year on year to 9,392 sales, while the Dammam Metropolitan Area saw a 22.4 percent increase, totaling 2,390 sales worth SR2.4 billion. 

Under Vision 2030, Saudi Arabia aims to achieve a 70 percent home ownership rate by the end of the decade. To support families in reaching this goal, the Kingdom has established the Sakani program, which offers personalized housing and financing solutions. 

Matthew Green, head of research Middle East and North Africa in CBRE, said: “The fundamentals for Saudi Arabia’s residential sector remain incredibly strong, as reflected in the sustained rental growth across key markets in the Kingdom.”  

He added: “Riyadh particularly is demonstrating attributes of an undersupplied market, driven by strong employment and population growth on the back of government investment projects, resulting in very tight supply in certain areas of the market as new deliveries fail to keep pace with the robust housing demand.” 

In the first half of 2024, Riyadh’s total residential rental transactions rose 6.1 percent to 274,146, while Jeddah saw a 2.3 percent year-on-year decline in rental transactions, totaling 183,894. 

Average apartment prices in the Saudi capital have appreciated approximately 11.7 percent annually since the third quarter of 2020, reaching SR5,000 per sq. meter by the end of the second quarter of 2024. 

“Average villa prices have also generally been on an uptrend since 2019 despite encountering a brief dip in early 2020 and again in early 2021, when values dropped 4.8 percent to SR3,820 per sq. meter, while prices have seen robust growth, with average villa values now resting around SR5,824 per sq. meter at the end of June, after rising 3.3 percent year-on-year,” said CBRE. 

In Jeddah, average apartment prices peaked before a 0.9 percent dip in the second quarter of 2024, now sitting at SR3,945 per sq. meter, while villa prices have seen a compound annual growth rate of 4.4 percent since 2020, reaching SR5,707 per sq. meter, according to CBRE. 

The analysis also highlighted that a segment of the population is seeking ideal financing options for suitable mortgage provisions to facilitate home acquisition, despite government efforts to enhance retail financing facilities through local banks. 

Highest priced districts 

The report identified Hittin and Al-Malqa as Riyadh’s most expensive districts for villas, with prices ranging from SR9,500 to SR13,500 per sq. meter. This was followed closely by Al-Malqa district with SR8,000 to SR12,900 per sq. meter. 

“At the other end of the spectrum, districts such as As-Suwaidi and Al Aziziyah commanded the lowest prices, with average villa prices ranging from SR2,150 per sq. meter to around SR4,800 per sq. meters in As-Swuaidi and SR2,200 per sq. meter, to SR4,050 per sq. meter in Al-Aziziyah,” added CBRE. 

The report noted that popular districts in Riyadh, such as As-Sulimaniyah, Al-Taawun, and An Nakheel, continue to command the highest average apartment prices.

In As-Sulimaniyah, the average sale price for apartments ranges from SR6,600 to SR10,500 per sq. meter, while in An Nakheel, prices average between SR7,200 and SR10,300 per sq. meter.

“The best value was to be found in districts such as Dar Al-Baida and Al Aziziyah, with prices ranging from SR1,900 per sq. meter to around SR3,250 per sq. meter and SR2,700 per sq. meter to SR 4,200 per sq. meter respectively across the two neighborhoods,” added CBRE. 

In Jeddah, the Ash Shati and Al-Murjan districts command the highest villa prices, with ranges from SR7,500 to SR13,350 per sq. meter. Conversely, areas like Al-Amir Fawwaz present more budget-friendly options starting at SR2,300 per sq. meter. 

CBRE reported that branded residences along the Red Sea command the highest values in prominent districts like Obhur Al-Junobiyah, with rates ranging from SR4,700 to SR7,400 per sq. meter. 

“The steady delivery of new apartments into Jeddah’s residential market over the past 18 months has resulted in significant fluctuation in average apartment sale prices,” said CBRE. 

It added: “The large quantum of new supply in districts such Al-Marwah, As Salamah and As Safa has resulted in saturating of the segment, skewing average prices. Branded residences along the Red Sea continue to command the highest values in prominent districts like Obhur Al-Junobiyah, whilst the lowest sale prices are found in Ar Rayyan.” 

As investment projects and population growth further stimulate the sector, Riyadh, Jeddah, and the Dammam Metropolitan Area are positioned for continued expansion, making real estate a vital component of the Kingdom’s economic diversification strategy under Vision 2030.