Real estate becoming a cornerstone of Saudi Arabia’s economic diversification, experts say

The residential real estate sector has been growing at a 4.5 percent compound annual growth rate since 2017. (Shutterstock)
Short Url
Updated 09 November 2024
Follow

Real estate becoming a cornerstone of Saudi Arabia’s economic diversification, experts say

RIYADH: Saudi Arabia’s real estate market has rapidly emerged as a key pillar in the Kingdom’s quest for long-term sustainability and economic growth, benefiting local residents and foreign investors alike, experts have told Arab News.

Under Vision 2030, the Kingdom is reshaping the sector through strategic investments, sweeping reforms, and mega-projects that are not only enhancing the nation’s infrastructure but also creating new opportunities.

A central objective of the initiative is to diversify Saudi Arabia’s economy by developing non-oil sectors, making it more resilient to global market fluctuations.

Real estate, as part of this strategy, is playing an increasingly important role in stimulating growth across the country, with tourism, entertainment, and the hospitality sector all assisting in reshaping the housing and commercial space landscape.

The Saudi government has enacted a series of reforms designed to enhance real estate development and attract private investment.

Key among these is the introduction of the Saudi Real Estate Refinance Co., established in 2017 to provide liquidity to the mortgage market and increase access to financing for homebuyers.

In an interview with Arab News, Sally Menassa, partner at international management consulting firm Arthur D. Little Middle East, said: “The Kingdom’s openness to foreign ownership in real estate, coupled with incentives for international companies, is expected to fuel increased FDI.”

Garvan McCarthy, chief investment officer at consulting firm Mercer, told Arab News the Vision 2030 goal of boosting private sector contributions has led to an increase in real estate activity.

“Reforms in regulations, such as easing foreign ownership restrictions and introducing public-private partnerships, have been undertaken to create a more attractive investment climate,” he added.

Another development is the introduction of the White Land Tax, which imposes a 2.5 percent tax on undeveloped residential land.

This is aimed at increasing the supply of developable areas and encouraging private sector investment in housing projects.

Additionally, government initiatives like Ejar, a rental services app, are enhancing transparency in the rental market and encouraging more investments in the tenancy sector.

Recent investments have been heavily directed toward urban development projects, including modern infrastructure such as roads, airports, and public transportation networks.

These investments are driving up property values in both urban and suburban areas, particularly in newly developed zones that are set to become key economic hubs.

Real estate as a catalyst for homeownership

Another core component of Vision 2030 is the government’s effort to raise homeownership rates among Saudi citizens to 70 percent by 2030.

In pursuit of this goal, Saudi Arabia has launched several initiatives aimed at providing affordable housing solutions and easing access to financing.

The Sakani program aims to make homeownership more attainable for Saudi families by providing financial support, facilitating loans, and subsidizing housing.

This initiative has significantly reduced barriers to homeownership, stimulating residential real estate development.

The residential real estate sector has been growing at a 4.5 percent compound annual growth rate since 2017, with projections indicating it will double by 2028, reaching SR51 billion ($13.5 billion), according to Menassa.

McCarthy added: “Since the introduction of these reforms, homeownership in Saudi Arabia has seen a substantial increase, driven by both governmental support and private sector development.”

The percentage of homeownership has exceeded 63 percent, up from 47 percent in 2016, reflecting the effectiveness of the Sakani program and other related initiatives.

Mega projects shaping the future of real estate

Several landmark real estate projects have become symbols of Vision 2030’s far-reaching impact. These projects are not only reshaping Saudi Arabia’s urban landscape but also positioning the Kingdom as a significant player in the global real estate market.

NEOM

Located in northwestern Saudi Arabia, NEOM is one of the most ambitious projects under Vision 2030. This multi-billion-dollar smart city aims to be a global hub for technology, sustainability, and innovation and provides opportunities for real estate development.

Menassa described NEOM as a “key aspect of this real estate transformation,” noting its role in the broader Vision 2030 agenda.

She pointed out that the development will incorporate smart city technologies, with a focus on industries such as energy, water, and biotechnology, as well as food, advanced manufacturing, and entertainment.

This forward-thinking approach is expected to attract both domestic and international real estate investors looking to capitalize on NEOM’s innovative urban vision.

Qiddiya

Qiddiya, another flagship project under Vision 2030, is positioned to become a global destination for entertainment, sports, and the arts. Situated near Riyadh, this expansive development will feature theme parks, concert venues, sports arenas, and cultural institutions.

The project’s focus on entertainment and tourism is expected to drive significant residential and commercial real estate development in the surrounding areas.

McCarthy added that Qiddiya is poised to transform the region into a vibrant entertainment capital, drawing millions of visitors annually and offering extensive opportunities for investors in hotels, commercial spaces, and residential properties.

The Red Sea

The Red Sea Project is one of the world’s most ambitious tourism initiatives, aiming to develop a luxury tourism destination along Saudi Arabia’s Red Sea coastline. Covering 28,000 sq. km, the project will include 50 hotels, 1,000 residential properties, and a host of leisure facilities.

Menassa pointed out that the project involves “developing real estate in the form of boutique hotels, museums, and cultural venues that enhance visitor experiences while respecting and preserving historical significance.”

This high-end tourism hub is expected to drive growth in the luxury residential and hospitality sectors, contributing significantly to Saudi Arabia’s tourism and real estate markets.

The future of Saudi real estate

As Saudi Arabia moves toward becoming a more diversified and sustainable economy, the real estate sector will continue to play a critical role in this transformation.

According to a report by King Abdullah Petroleum Studies and Research Center, Saudi Arabia’s economic diversification will lead to an increase in high-value industries such as advanced manufacturing, pharmaceuticals, and renewable energy, all of which will drive further demand for commercial real estate.

Menassa observed that the Kingdom’s commercial real estate market size is estimated to grow “at a strong CAGR of around 8.6 percent to 2028.”

McCarthy added: “As Saudi Arabia diversifies into advanced manufacturing, renewable energy, and pharmaceuticals, commercial real estate should benefit from the demand for specialized facilities.”

Moreover, as sectors such as tourism, entertainment, and retail flourish under Vision 2030, demand for hospitality and retail spaces is expected to rise substantially.

The ongoing transformation is positioning Saudi Arabia as a key player in the global real estate and tourism industries, with Riyadh at the heart of its ambitious vision.


NEOM board of directors announces leadership change

Updated 12 November 2024
Follow

NEOM board of directors announces leadership change

  • Head of Public Investment Fund’s Local Real Estate Division since 2018, Al-Mudaifer has a deep and strategic understanding of NEOM and its projects

NEOM: The NEOM Board of Directors on Tuesday announced the appointment of Aiman Al-Mudaifer as acting CEO of the company. Al-Mudaifer assumes leadership of NEOM, following Nadhmi Al-Nasr’s departure.

As NEOM enters a new phase of delivery, this new leadership will ensure operational continuity, agility and efficiency to match the overall vision and objectives of the project.

Al-Mudaifer takes the helm of the organization with the support of a strong leadership team across NEOM’s regions, sectors and departments.

Head of Public Investment Fund’s Local Real Estate Division since 2018, Al-Mudaifer has a deep and strategic understanding of NEOM and its projects.

In his role at PIF, Al-Mudaifer oversees all local real estate investments and infrastructure projects. He is also a board member of multiple prominent companies within the Kingdom.

NEOM is a fundamental pillar of Saudi Vision 2030 and progress continues on all operations as planned, as we deliver the next phase of our vast portfolio of projects including THE LINE, Oxagon, Trojena, Magna and The Islands of NEOM. 

Through these projects, NEOM seeks to achieve harmony between livability, business and nature, and to create a better future for current and future generations.


Maldives, Bulgaria push for greater climate action, financing

Updated 12 November 2024
Follow

Maldives, Bulgaria push for greater climate action, financing

RIYADH: Insufficient financing continues to be a significant barrier preventing many countries, especially underdeveloped nations, from meeting their climate goals, according to the President of the Maldives.

Speaking on the second day of COP29, held in Azerbaijan from Nov. 11-22, Mohamed Muizzu emphasized that small island developing states require trillions, not billions, of dollars in climate finance.

“It is the lack of finance that inhibits our ambitions, which is why this COP, the finance COP, we need to deliver the new climate finance goal. This must reflect the true scale of the climate crisis. The need is in trillions, not billions,” Muizzu said.

He added, “It must consider the special circumstances of small island developing states — it must include adaptation, mitigation, and loss and damage.”

Muizzu also reiterated the importance of the environment for his country, stating: “You have called for stronger climate action. Our call has not changed. Our cause has not strayed because, for us, the environment and the ocean are more than resources. They are our cultural identity.”

In a similar vein, Bulgarian President Rumen Radev addressed the global impact of climate-related disasters, emphasizing that no region is immune to the deadly and costly consequences of climate change.

“Bulgaria is committed not only to being part of regional and energy cooperation initiatives across Central and Eastern Europe, the Balkans, and the Black Sea region but also beyond, by strengthening the links between the European Union and non-EU countries who share our priorities on climate neutrality, just energy transition, energy security, and low-carbon technological innovation,” Radev said.

He further called for broader action, stating, “All parties should undertake greater efforts to integrate climate change adaptation and resilience into all policies and strategies.”


Closing Bell: Saudi main index slips to 12,048

Updated 12 November 2024
Follow

Closing Bell: Saudi main index slips to 12,048

RIYADH: Saudi Arabia’s Tadawul All Share Index fell on Tuesday, losing 58.74 points to close at 12,047.67.

The total trading turnover of the benchmark index was SR5.75 billion ($1.53 billion), with 70 stocks advancing and 152 declining.

Saudi Arabia’s parallel market saw a drop, losing 50.59 points to close at 29,110.41. The MSCI Tadawul Index also declined, shedding 5.06 points to end at 1,516.14.

The best-performing stock on the main market was Al Jouf Cement Co., with a 4.75 percent increase to SR10.58. Other top gainers included Malath Cooperative Insurance Co. and Elm Co., with shares rising by 4.40 percent to SR15.66 and 3.87 percent to SR1,101.1, respectively.

The worst performer on the main index was Fawaz Abdulaziz Alhokair Co., whose share price dropped by 4.42 percent to SR12.12.

National Environmental Recycling Co., also known as Tadweer, announced it had signed a memorandum of understanding with Re Sustainability Middle East Co. to explore the potential for establishing smelters and recycling units in the Kingdom. According to a statement on Tadawul, the deal is valid for one year and carries no immediate financial impact.

The company’s share price declined by 0.45 percent to SR13.4. 

Purity for Information Technology Co. announced it has secured a contract valued at SR10.7 million from Saudi Comprehensive Technical and Security Control Co. to supply technology equipment. The company stated that the financial impact of the contract will be reflected in the first quarter of next year.

Its share price dropped by 0.73 percent to SR8.33.

Red Sea International Co. reported a narrowed net loss of SR2.18 million for the first nine months of this year, compared to a SR54.7 million loss in the same period in 2023. According to a statement on Tadawul, the improvement was driven by a 515.78 percent year-on-year increase in sales revenue. However, Red Sea International’s share price declined by 4.05 percent to SR71.

Lazurde Co. for Jewelry reported a 42.98 percent decline in net profit for the first nine months, totaling SR24.8 million, compared to the same period last year. The company attributed this drop to a 6.61 percent year-on-year decrease in operating profit over the nine-month period. Lazurde’s share price dropped by 2.05 percent to SR13.36.


UN climate chief urges aggressive action as emissions hit GDP

Updated 12 November 2024
Follow

UN climate chief urges aggressive action as emissions hit GDP

  • UN official warned that worsening climate impacts will ‘put inflation on steroids’ unless every country takes bolder climate action
  • Simon Stiell called on governments to leave COP29 with a clear global climate finance plan

RIYADH: The global climate crisis is rapidly evolving into an economic threat, with the impact of emissions reducing the gross domestic product of several countries by up to 5 percent, a UN official said. 

Speaking at the high-level segment for heads of state and government at the COP29 in Baku, Simon Stiell, executive secretary of the UN Framework Convention on Climate Change, emphasized the urgent need for more aggressive climate actions to address economic challenges, including rising inflation. 

“We used to talk about climate action as being mostly about saving future generations. But there has been a seismic shift in the global climate crisis, as the climate crisis is fast becoming an economy killer,” said Stiell. 

He added, “In this political cycle, climate impacts are curving up to 5 percent off GDP in many countries. The climate crisis is a cost-of-living crisis, as climate disasters are driving up costs for households and businesses.” 

Stiell’s comments came shortly after a report by finance consultancy Oxera, which revealed that climate-related extreme weather events have cost the global economy more than $2 trillion over the past decade, with the US being the most affected. 

The UN official warned that worsening climate impacts will “put inflation on steroids” unless every country takes bolder climate action. 

Stiell urged the world to learn from the COVID-19 pandemic, highlighting the economic suffering caused by slow and ineffective collective action on supply chain issues. 

Describing climate finance as “global inflation insurance,” he warned that failing to address the economic toll of climate change would lead to disaster. 

“Letting this issue languish halfway down cabinet agendas is a recipe for disaster,” he said. 

However, Stiell remained optimistic, asserting that effective climate action could save economies and create new economic opportunities. He pointed to the growth of renewable energy as a potential driver of stronger financial states for nations. 

“This isn’t just about saving your economies and people,” he said. “Bolder climate action can drive economic opportunity. Cheap, clean energy can be the bedrock of your economies. It means more jobs, growth, less pollution choking cities, healthier citizens, and stronger businesses.” 

Stiell called on governments to leave COP29 with a clear global climate finance plan and urged international cooperation as the key to combating global warming and ensuring humanity’s survival. 

“We need your direct engagement on new national climate targets and plans — NDCs — so that all of you can benefit from the boom in clean energy and climate resilience,” said Stiell. 

He added: “These are not easy times, but despair is not a strategy, nor is it warranted. Our process is strong, and it will endure. After all, international cooperation is the only way humanity can survive global warming.” 


OPEC revises down global oil demand growth forecasts for 2024, 2025

Updated 12 November 2024
Follow

OPEC revises down global oil demand growth forecasts for 2024, 2025

  • OPEC revised its 2024 global oil demand growth estimate to 1.82 million barrels per day, down from 1.93 million bpd forecast last month

LONDON: The Organization of the Petroleum Exporting Countries has again downgraded its global oil demand growth projections for both 2024 and 2025, marking the fourth consecutive reduction.

The revision, announced on Tuesday, underscores weaker demand expectations for key regions such as China, India, and other parts of the world.

The updated forecast highlights the ongoing challenges faced by OPEC+, the broader alliance that includes OPEC members and partners like Russia. Earlier this month, OPEC+ delayed plans to increase oil output starting in December, citing concerns over falling oil prices.

In its latest monthly report, OPEC revised its 2024 global oil demand growth estimate to 1.82 million barrels per day, down from 1.93 million bpd forecast last month. This marks the first revision to the outlook since it was initially set in July 2023.

China was the primary driver of the downward revision. OPEC reduced its forecast for Chinese oil demand growth to 450,000 bpd, down from 580,000 bpd, noting that diesel consumption in September dropped year on year for the seventh consecutive month. OPEC attributed this decline to a slowdown in construction and weak manufacturing activity, as well as the rising use of LNG-fueled trucks in China.

The weaker outlook weighed on oil prices, with Brent crude trading below $73 per barrel following the release of the report.

The demand outlook for 2024 remains uncertain, with significant differences among forecasters regarding the strength of global demand growth, particularly concerning China’s recovery and the pace at which the world transitions to cleaner fuels.

In addition to the 2024 revision, OPEC also lowered its forecast for global oil demand growth in 2025 to 1.54 million bpd, down from the previous estimate of 1.64 million bpd.