The Kingdom of Saudi Arabia enjoys a sustained boom in real estate investment, which has been the driving force behind the development of innovative and sophisticated construction projects in the country, despite the volatility in the supply and demand situation. Government statistics indicate that the volume of investments in available land in Saudi Arabia during the past two years has reached more than USD one billion.
The growth of the real estate market in KSA is due to a number of factors, most important of which are government spending and the completion and launching of new real estate projects. Also contributing to the favorable market conditions are expectations of lower controls on real estate finance (mortgage), the continuing thrust of Saudi banks’ to introduce new real estate financing facilities for individuals, the active participation of wealthy Saudi businessmen in the local real estate market and the limited number of investment channels. The continued strong demand for residential properties is also supported by other factors, including rapid population growth, particularly in major cities, that is projected to be sustained for the
next 10 years, as well as the increase in the number of Saudi families, and increased rates of migration to urban cities. Moreover, studies have shown that housing demand in the low and middle income sectors is estimated to reach 150,000 to 200,000 units per year.
The total investment in the Saudi real estate sector (housing wealth) reached SAR 1.125 trillion (USD 300 billion) in 2009 and exceeded SAR 1.5 trillion (USD 400 billion) by the end of 2010, as the real estate sector rapidly expanded driven by government-funded development projects. Moreover, Saudi Arabia is experiencing strong economic growth due to government and private investments across the residential, office, hotel and retail markets.
There are now a variety of mega projects across the Kingdom, including tourism properties, industrial developments, residential projects as well as commercial properties. Large-scale development projects are likewise being actively undertaken around the Holy Mosque, where the property value is one of the most expensive in the world.
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Market Trends:
Emerging trends continue to influence the growth of Saudi Arabia’s real estate market. New trends in design, smart technologies and construction practices are creating an impact on the development of more innovative and ambitious real estate projects across the Kingdom.
Aggressive government spending on real estate projects acts as a catalyst for the growth of the real estate sector, while helping create new employment opportunities and build new communities. The integration of various social projects and infrastructure development initiatives is crucial in promoting economic stability and social security. This will also boost the real estate market in Saudi Arabia, as manifested by the steady recovery of the real estate sector in line with the long-term positive growth outlook of the Saudi economy. Moreover, investments in new transportation systems and infrastructure projects will further open investment opportunities and increase the attractiveness of Saudi real estate market.
For the year 2012, Saudi Arabia announced the largest budget in its history amounting to SAR 690 billion. The budget accordingly provides significant support to the real estate sector as the Custodian of the Two Holy Mosques King Abdullah bin Abdul Aziz issued a decree to improve living conditions of all Saudi citizens. The allocation for the Real Estate Development Fund was raised to SAR 40 billion, which will help create new jobs in the long run and further raise the standard of living in the country. The government's plans and recent decisions will also have a direct and indirect impact on the real estate sector. The residential segment has been directly affected by the construction of residential projects by the Public Authority for Housing (500,000 units), the National Guard (17,000 units) and the General Authority for Social Insurance Saudi Arabia (691 units). Building new communities also creates new opportunities for the retail sector, which has also benefited from increased consumer spending because of recent increases in salaries.
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