RIYADH: Setting the tone for the shape of things to come, 2023 began on a high note for the real estate industry, with deals worth more than SR10 billion ($2.66 billion) signed on the opening day of the Real Estate Future Forum which was organized. in Riyadh from 23-25 January.
The strong start to the year comes in the wake of a report published by PwC Middle East in December, which noted that the Kingdom has made significant progress in transforming its housing sector over the past decade.
It said the government’s strong policies and initiatives, including the activation of a number of financial products, are driving the sector forward, addressing key challenges facing the housing market, and making home ownership accessible to new generations of Saudis. Creating a possibility for.
The positivity was echoed by Faisal Durrani, head of Middle East research at global real estate consultancy Knight Frank.
“We are eyeing around 555,000 housing units that are set to be delivered around the Kingdom by 2030, with Riyadh alone set to see an additional 200,000 homes as the Saudi capital is set to increase its population by 127 percent by the end of the year. reaches 17 million. of the decade,” he told Arab News.
However, he added a note of caution, saying: “Despite the volume of planned new homes, we anticipate a national shortfall of around 1.5 million units. Adequate, of course, to meet extraordinary levels of current and future demand.” There is a warning about creating stocks.
With such expansion on the horizon, it is hardly surprising that there is keen interest from investors, who are looking to capitalize on the strong outlook for the real estate sector in the Kingdom.
For example, Bahrain-based Investcorp announced earlier in January that it would invest $1 billion in Saudi real estate over the next five years.
Yousef Al Yousef, head of private property at GCC for Investcorp, told Arab News: “Saudi Arabia’s real estate market is undergoing rapid transformation, as the kingdom’s appetite for megaprojects and economic prosperity under the Vision 2030 agenda increase. Has been.”
The changing face of Saudi Arabia
A report by S&P Global published in December last year set out Saudi Arabia’s real estate ambitions as part of its Vision 2030 program for economic diversification.
According to the report, the Kingdom has $1 trillion earmarked for real estate and infrastructure projects, with plans for at least eight new cities, mainly along the Red Sea coast, to house more than 1.3 million new homes by the end of 2030. Will be
Projectedly, Saudi Arabia remains the largest construction market in the Middle East region, with $31 billion worth of awarded projects totaling $87 billion during the first 10 months of 2022, according to Rani Mazzoub K, Head of Real Estate Advisory at KPMG. According to Merchant Services.
“Along with having the undisputed leadership in the region in terms of market size, Saudi Arabia is also becoming one of the leading countries in terms of real estate innovation globally,” he told Arab News.
“The Kingdom is set to shape its construction and development at an unprecedented pace – with the share of construction targeted to reach 8.8 per cent of nominal GDP as per Vision 2030. Currently, the share of construction is estimated at 6.4 percent which equates to an annual expenditure of SR197 billion,” Majoub said.
According to KPMG estimates, the share of construction is expected to reach SR382 billion by 2030, driven by both GDP growth and an increase in GDP contribution by the construction sector.
What differentiates Saudi Arabia, according to Majzab, is the large number of megaprojects that are set to develop over the next decade, which will contribute to the digital transformation of cities brimming with heritage and culture.
Some examples include Jeddah Central Development, Makkah Heritage District, Diriya Gate Development, Qidiya, King Salman Park, Riyadh Sport Boulevard, NEOM, Red Sea Project and Soudah Development.
Most of the megaprojects, which are set to come to fruition over the next decade, will not only transform the landscape of the Kingdom but, in many cases, the day-to-day lives of the residents.
Sapna Jagtiani, Director, said, “The ISKCON program, which aims to increase home ownership for Saudi households to 70 percent by 2030, is designed to provide the necessary infrastructure for housing and encourage landlords to develop real estate projects.” tasked to do.” , S&P Global Ratings.
“While the white land tax (on undeveloped land) has been in effect for some years with some success, the government has launched a second phase of its idle land program to ensure fair competition and a balance between supply and demand for modern estates.” Has done,” said Ilya Tafintsev, associate at S&P Global Ratings.
“The Kingdom is currently undergoing a major transformation with Vision 2030 as an ambitious but achievable mission,” Mohammed Al-Otaibi, CEO of Ajdan Real Estate Development, told Arab News.
“We believe that development projects will play a key role in establishing Saudi Arabia as a leading tourism, entertainment and real estate destination to rival the likes of Dubai. And partnering with more operators to really enhance the offering in Saudi Arabia.
“As Saudi Arabia continues its economic growth, the demand for residential properties will also increase,” PwC’s Middle East Consulting real estate cluster leader Imad Shahouri told Arab News.
Saudi Arabia remains the largest construction market in the Middle East region, accounting for $31 billion of the total $87 billion worth of projects during the first 10 months of 2022.
Rani Mazoub, Head of Real Estate Advisory, KPMG Professional Services
“The Kingdom has pursued massive national programs as part of the Saudi Vision 2030, including The Housing Program, which aims to provide housing solutions to Saudi citizens and benefit from suitable homes. The expansion project set a mission to improve the condition and quantity of housing for present and future generations.
“In alignment with Vision 2030, the housing program will provide housing units for Saudi families, with 70 percent of Saudis expected to be homeowners by the end of 2030,” Shahouri said.
“Demand for the residential sector is being driven by the Vision 2030 target of increasing home ownership to 70 percent by the end of the decade and by mid-2022, Saudi Real Estate Refinance Company estimates that home ownership will reach 60 percent, informed Arab News Junaid Ansari, Head of Investment Strategy and Research at Kamco Invest.
“Broadly speaking, we think a wait-and-see approach is being adopted in some cases, where many potential buyers are awaiting delivery of new major developments,” Pedro Ribeiro, general manager of CBRE Saudi Arabia, told The Arab Times. news.
“Many of these developments will help provide the market with much needed supply, but more importantly the quality and asset configuration required at affordable price points. This trend is not just limited to Riyadh, but also in countries like Jeddah, where we have seen several remarkable masterplan launches.
all eyes on riyadh
While a number of projects have been earmarked for existing main cities, the big question is whether the government can meet its ambitious target of making Riyadh one of the world’s 10th largest economies by 2030, with a population of 15 million by 2030. is estimated to exceed.
Al-Otaibi added, “We are optimistic that Riyadh will continue to develop at an impressive rate – there is demand and there is no shortage of industry professionals well-equipped to meet the demand.”
“At Ajdan alone, we are involved in a number of new residential projects in Riyadh that will make a significant contribution to the city’s economy, not to mention the many other developers in both the private and public sectors who will be delivering mega-scale projects in and around Riyadh. , So we are confident that the government will reach its target.
“As ambitious as it sounds, this objective requires significant effort on the economic, regulatory and development fronts. So far, the government has not only shown determination but also put in the necessary effort and innovative ideas to meet the challenge. Has been applied.”
He said: “The government is focused on increasing private sector participation from 40 per cent to 65 per cent and increasing the contribution of small and medium enterprises to GDP.
“Regulatory steps such as reducing bank guarantee requirements for developers, relocation of international company regional headquarters to Riyadh, and expansion of industrial zones are some of the key measures taken by the government to drive the expected growth.”
Mazzoub explained, “Megaprojects like the metro will increase mobility and allow the city to expand and develop in the outskirts like Diriyah.” “On the other hand, lifestyle projects such as Diriya, King Salman Park, Qidiyah, etc. are set to become a reflection of future life that will attract expatriates and locals from other parts of the country.”
He concluded, “The current development trajectory, announced mega projects, government plans and regulations, and private sector response all show positive signs and increase the chances for Riyadh to achieve its ambitions.”
“While focused in Riyadh, this transformational change in infrastructure and cross-cultural engagement is not specific to it,” Shahouri said. “Other major cities, such as Jeddah, are also getting a makeover with a massive redevelopment effort. For example, the Kingdom will invest $20 billion to revitalize and revitalize approximately 5.7 million square meters of the picturesque waterfront in the Jeddah Central Project A similar initiative is being taken in Madinah as well.”