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New York, Jan. 25, 2022 (GLOBE NEWSWIRE) -- Reportlinker.com announces the release of the report 'Saudi Arabia Real Estate Market - Growth, Trends, COVID - 19, and Forecast (2021 - 2026)' -
This was at a time when emergency health spending and government support programs added to fiscal pressures. As of May 2021, Saudi Arabia's real estate market has begun to show an overall improvement in business activity following the downturn caused by COVID-19. After a deep contraction in 2020, Saudi Arabia's economy is on a recovery path as new COVID-19 cases stabilize at manageable levels, global conditions improve, and the national vaccination program gains momentum. Property tax relaxations, meeting labor shortages, and affordable housing programs under various stimulus packages have been crucial factors of success for real estate companies across Saudi Arabia.
Saudi Arabia's building and construction activities increased by 14% year-on-year (YoY) in the first six months of 2021. The Saudi real estate market saw an annual increase of more than 375,000 multi-purpose units, as approximately 100,000 new families across the Kingdom join the market every year. The government is offering several incentives to foreign companies willing to work in the Saudi market and contribute to the growth of the real estate sector and the overall economy.
The commercial property sector's value of transactions registered with the Ministry of Justice rose sharply to SAR 9.6 billion (USD 2.5 Billion) in the first two months of 1443, ending 6 October 2021, from SAR 5.7 billion(USD 1.5 Billion) and SAR 5.8 billion in the first two months of the previous Hijri year 1442, a period ending 16 October 2020. The value of residential real estate transactions in the first two months of 1443 totaled SA R17.9 billion (USD 4.7 billion), up 8% from SAR 17.7 billion (USD 4.7 Billion), in the same period of 1442 and 1441.
Saudi Arabia's real estate market slid in late December 2021 by 9.1%, as the value of deals finalized at a weekly rate of less than SAR 4.1 billion (USD 1.09 billion). All segments of the real estate sector recorded a decline, with the residential sector transactions declining by 4%, the commercial sector fell by 11.7%, and the total value of transactions in the agriculture and industrial sectors dropping by 27.1%.
Saudi Arabia's residential market is expanding at a rapid rate, with apartment values in Riyadh and Jeddah showing the fastest pace of growth in five years. Riyadh and Jeddah have seen apartment values accelerate by 17% and 12%, respectively, over the last 12 months alone (as of November 2021).
In the residential market, the delivery of units in both Riyadh and Jeddah continued apace in Q3 2021 as the government made further progress in its aim to increase the percentage of Saudi families owning homes to 70% by 2030.
Key Market Trends
Residential Sector sustains country's real estate market
Saudi Arabia has identified housing as one of its key projects under Vision 2030. The ministry aims to build 300,000 housing units over the next five years in partnership with the private sector.
As conditions post-COVID-19 stabilize, residential mortgages registered an annual increase of 48%, with a total value of SAR 71.4 billion (USD 19.03 Billion) , during the first five months of 2021. Moreover, based on the high demand for residential villas, as they represent 80% of total mortgages, the Ministry of Housing (MOH) Sakani program provided 77,000 housing units to citizens during the first five months of 2021, which is roughly 55% of the target of 140 thousand units by 2021.
Construction activity in the residential market remained somewhat active, as various projects were delivered across the main cities, with around 26,500 units handed over during the first half of 2021. This brings the total residential supply to 1.3 million and 840,000 in Riyadh and Jeddah. While the total stock for Makkah and DMA stands at 404,000 and 366,000.
Regarding performance, asking sale prices for apartments and villas jumped by almost 10% in West Riyadh compared to the same period last year (2020). Meanwhile, they also increased almost 12% in the North of the city over the same period. n Construction of over 106,000 new housing units has been completed, while 101,000 housing units have been under construction since the first quarter of 2021. The number of new units exceeded 344,000 during 2020, enhancing the diversity and increasing the supply of high-quality units with appropriate prices.
The average prices of residential apartments during Q1 of 2021 dropped to below USD 133,000 since 2020. The average selling prices of land and homes stabilized during the same period. It explained that the drop in prices reflects the provision of housing solutions and options that meet the Saudi families' desires in partnership with real estate developers in all cities and regions across the Kingdom.
International companies are opening regional headquarters in Riyadh
In Oct 2021, A total of 44 multinational companies received licenses to move their regional headquarters to Saudi Arabia's capital Riyadh. Among the 44 companies are multinationals in sectors including technology, food and beverages, consulting, and construction, including Unilever, Baker Hughes, and Siemens.
Earlier 2021, 24 companies had signed agreements to establish main regional offices - including PepsiCo, Schlumberger, Deloitte, PwC, and Bechtel rather than oversee operations remotely from the UAE's Dubai emirate.
Through the Regional Headquarters Attraction Program of Multinational Companies, these companies now have direct access to the region's largest economy, gaining financial and geographic opportunities whilst being part of one of the most exciting transformations happening in any city in the world.
The second quarter of 2021 witnessed the registration of 600 new international companies in Saudi Arabia and their lease of first-class offices in Riyadh to coincide with the Kingdom's orientations within the program to attract regional headquarters for international brands.
In contrast to the global trend of companies to reduce their office space by 20 to 30%, Riyadh is witnessing a high demand for offices, especially first-class, due to the program to attract multinational companies. The establishment of new government agencies and the endeavor of existing facilities to attract the best skills. Saudi Arabia had launched a stimulus initiative for foreign companies to exempt them from income tax and give them incentives to move their regional offices to the Kingdom.
Competitive Landscape
The market has high competition where the demand for new properties is increasing due to growth in the commercial activities and increase in competition.
Some of the major real estate development companies operating in Saudi Arabia are Al Saedan Real Estate, Kingdom Holding Company, Ewaan, SEDCO Development, Jabal Omar Development Company, Emaar.
More than 95% of the local real estate developers are primitive in their work. The old ways of doing business for them would impose a huge challenge to supply the market with high-quality office buildings as the Kingdom dictated that all foreign companies, which have contracts with the government, have to move their head offices to Saudi Arabia. This means the country needs more office buildings to meet international standards to cover the huge demand for foreign companies and investors.
The market is expected to witness the aggressive competition between local and international developers. Companies must change their strategies to survive, and they can only do this by adopting international standards and practices.
International real estate companies enter the Saudi market as soon as they can to secure their place and obtain a market share, as this is a growing and promising market in its early stage of booming.
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