Market Trends of Saudi Arabia Real Estate Industry
The Residential Sector Sustains Country's Real Estate Market
Saudi Arabia has identified housing as one of its key projects under Vision 2030. The housing ministry aims to build 300,000 housing units over the next five years, in partnership with the private sector.
Looking at Saudi Arabia's office sector numbers, visitation to the workplace remained higher than its pre-pandemic baseline, presently standing 19.3% higher. The focus of activity remains on Riyadh, where demand continues to surpass supply. As a consequence, occupancy levels in Riyadh have increased by 0.7 percentage points in the prior quarter, reaching 98.1% on average in 2022. Constrained supply levels have also continued to sustain rental rate rise, with average Grade A and Grade B rentals increasing by 3.9% and 4.2%, respectively, in the year 2022.
To attain a housing supply of 4.96 million residences by 2030, the Kingdom will need to build around 1.2 million additional homes during the next decade. Housing demand is predicted to rise from 99,600 houses in 2021 to 153,000 houses by 2030, with an average of 124,000 dwellings built per year over that time.
In the last decade, the Kingdom of Saudi Arabia has achieved significant progress in reforming its housing industry. It is expected to accomplish its goals of 70% house ownership and an 8.8% contribution to national GDP by 2030.
In the year to August 2022, the overall number of mortgages tied to flat purchases climbed by 12% across the Kingdom, compared to a 45% fall in villas. Rising corporate activity and a rise in overall employment in Riyadh are driving up demand for residential units.
Indeed, according to the most recent Oxford Economics prediction, employment in Riyadh will have climbed by roughly 5% by the end of 2022, with a further 3% growth expected in 2023.
International Companies are Opening Regional Headquarters in Riyadh
The Saudi government has set up a new program intended to accelerate its plan to attract international companies to the Kingdom.
Saudi Arabia has announced some companies will be able to operate in the kingdom without having a headquarters in the country.
Companies with foreign operations not exceeding 1 million Saudi riyals (USD 266,000) can operate in the kingdom without local headquarters.
MISA's data also reveals that 53 investment deals were signed across various sectors during 2022. These include sectors like communications and IT, energy, and health.
Despite global economic uncertainty, the total number of new investment licenses issued during 2022 amounted to 1,163, reflecting new foreign investment license stability.
Moreover, MISA stated that, after excluding the number of new licenses issued as part of the campaign to combat commercial cover-up, 928 new licenses for foreign investment were issued in 2022.
This represents an 8.8 per cent increase year on year, reflecting the Kingdom's position as an appealing investment destination, with strong competitive advantages represented in a stable and supportive investment environment, as well as the availability of local inputs, young human resources, and the Kingdom's strategic geographical location.
Companies having foreign activities worth less than one million Saudi riyals (USD 266,000) are permitted to operate in the kingdom without establishing a local headquarters. Saudi officials expect that 480 companies will set up shop in the kingdom by 2030, as the country seeks to diversify its oil-rich economy. PepsiCo, DiDi, Unilever, Siemens, KPMG, Novartis, Baker Hughes, Halliburton, Philips, Flour, Schlumberger, SAP, PwC, Oyo, Boston Scientific, and Tim Hortons were among the corporations that had already relocated their regional headquarters.
The Kingdom of Saudi Arabia's Regional Headquarters Attraction Programme for Multinational Companies, a Vision 2030 project, is intended to provide major local benefits to the Saudi economy. The move is also intended to allow local talent to collaborate with multinational corporations. Riyadh's Grade A office average rents increased by 5.9%, while Grade B managed an increase of 3.5% in the 12 months to September 2022.
