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The Saudi real estate industry is set for robust growth in 2024 driven by increasing investment, flexible regulations, and monetary policy that is conducive to growth, according to an S&P Global ratings report (pdf). That’s good news for developers and builders: Demand for real estate fell last year on the back of high interest rates and with price pressure.
Growth drivers: With interest rates set to start to fall in 2H 2023 in tandem with the Fed, demand for mortgage finance should get a boost, helping it rally from a 34% drop in 2023. The new premium residency scheme should make real estate more accessible for the growing number of foreigners who set up shop in the kingdom, and a better regulated off-plan industry will also fuel demand.
The downside risks: The Riyadh real estate market remains very tight — a development that will put upward pressure on prices. High interest rates (at least in the first half) will also hurt.
There are signs of rising foreign demand for real estate here as the government prepares to relax ownership rules for non-Saudis. Some 22% of high-net-worth Muslim investors surveyed eyeing real estate purchases in the Kingdom this year. Another 33% are looking at making investments in the next 24 months, Aleqtisadiah reports citing a survey by global real estate consultancy Knight Frank. The survey polled 506 Muslims from 9 countries to gauge attitudes toward real estate investment in the Kingdom. Makkah topped the list with 30%, followed by Riyadh at 25% and Madinah with 19%.
High demand for the holy cities: HNW survey respondents have aggregate demand for some USD 2 bn in property purchases in the holy cities, with interest from 84% of those surveyed. 48% of those who are interested in property purchases in Makkah want to make it their primary residence. 40% of those looking to invest in Makkah are willing to spend over USD 5 mn (with the average budget for purchases in holy cities ast USD 4.7 mn).
Why it matters: The premium residency schemes unveiled in January include options linked to property ownership, a key step in opening the domestic market to foreign homebuyers.
