Sunday, 21 December 2014  -  29 Safar 1436 H
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Kingdom’s Booming Real Estate Sector to Hit New High in 3 Years

JEDDAH – The Saudi booming real estate sector will hit new high over the next three years backed by several economic, legislative and financial factors, expect property experts.
They estimate the growth rate of fixed capital stock at 45-55 percent between 2005 and 2007 following the sharp increase in the Saudi gross domestic product from SR41.7 billion in 2000 to more than SR60 billion now, according to the latest statistics.
This surge in capital inflows comes amid annual real estate transactions worth SR200 billion and investments ratcheting up to more than SR1.2 billion.
Several factors are cited to be behind this prosperousness, primarily the rising oil prices that have reached an all-time high of $102 per barrel, an unprecedented price tag that is surely to augment liquidity and consequently provide further stimulus to the expanding housing market.
Ziyad Al-Ghathbar, regional manager of Tanmiyat Group, highlighted the Saudi government’s large-scale spending on infrastructure and residential projects for low-income segments in order to meet the rising growth in population in major cities, put at 4 percent. He said “with the growing needs of a young population, the housing market is no longer focused on luxury villas and palaces but on the needs of a changing society. 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 bound to increase to around 2.9 million over the next 20 years.”
The Kingdom’s population is the largest in the Gulf and current demand for housing far outstrips the supply. The capital Riyadh contains the largest number of population Kingdom-wide, estimated at 23 percent of the total population, then comes Makkah, 24 percent, then the Eastern Zone, 14 percent, with the three of them accounting for around 63 percent of the total population.
Commenting on a report issued by Tanmiyat Group, Al-Ghathbar added that “the fluctuating Saudi stock market and the investors’ inability to reap enough profits for two years now are two factors that have forced investors to shift their businesses to alternative markets, primarily the housing market. Official figures released from the Saudi real estate market confirm a remarkable success in attracting a considerable portion of the total liquidity available on the local market for investment besides wooing further 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 real estate boom also owes a great deal to relatively lower risk levels and the absence of excessive price fluctuations, with the demand 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. Over and above, the Kingdom is still seeking to improve its real estate legislations to further attract more investments into its markets.
Among projects established in Saudi Arabia is King Abdullah Economic City. It will be a multi-stage development with construction having started on Dec. 21, 2005.
This mega project will closely integrate itself into the Kingdom’s ongoing drive to expand the economy, create employment opportunities for its youthful 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 million employment opportunities in the various industries and service-oriented companies that will open in the City.
Current investments in Makkah are valued at between SR2 billion to SR10 billion, while the capital Riyadh is attracting more investments, the real estate volume of which is forecast at SR15-17 billion.
 
   
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