overview 06
O pening up
the Kingdom
Saudi Arabia’s real estate transformation is defying the global
economic odds with mega projects under development poised
to change both the commercial and physical landscape
While other emerging market destinations are seeing a dramatic estimates from the Saudi Arabia Investment Fund (SAIF) reveal
slowdown in the real estate sector, Saudi’s development strategy that through 2010, total new real estate construction activity is
looks set to continue as planned, with many key projects, including likely to reach US$130 billion in value, led by the housing sector and
the quartet of economic cities, already announcing their intention closely followed by office and retail space.
to move forward with scheduled construction. The fastest- Data from The World Bank’s ‘Doing Business 2009’ report,
growing country in the Middle East, with an estimated US$283 which covers 178 countries, saw Saudi Arabia once again move
billion worth of projects under construction, real estate is the up the rankings, currently sitting in 16
th
place in terms of ease of
second largest economic driver for the country, after oil. doing business, up eight spots from 2007/8.
The Kingdom is awash with billion-dollar real estate projects. In terms of regulatory development, a relaxing of real
On the liquidity front, the country benefits from its sizeable estate ownership regulations as well as the imminent ratification
economic surplus, a welcome cushion for the short to mid- of the long-awaited mortgage law are also positioned to spur
term as the region strives to extricate itself from the current real estate growth in 2009. Commenting on the mortgage law,
situation. According to a January 2009 market report by Colliers’ Saudi Arabia Real Estate Q4 2008 report confirmed that
Kuwait-based Global Investment House, ‘the growth outlook the law is ‘expected to boost pure investor and owner-occupier
for the Saudi Arabian economy looks robust, with public and oil activity and will serve as a core catalyst in Riyadh’s market where
sectors invest ment programme exceeding US$400 billion over only 22 percent of its population are owner-occupiers’.
the next five years’. The demand-supply equation, principally in the residential
Global Investment House predicts a softening of the Saudi sector, is weighted in favour of the developer, and both sales
economy in 2009 but reaffirms that the Kingdom’s ‘inherent and rental prices have, to date, maintained high levels. With
strengths’, supported by ‘factors like easing of inflation, low home ownership levels currently standing at just 24 percent,
debt to GDP ratio, strong banking system and domestic once mortgage financing is in place, as-yet-unfulfilled demand
consumption demand will largely facilitate the Kingdom in for housing is expected to be unlocked. The government is also
continuation with its robust economic growth plans’. And with addressing the need for middle-income housing through the
more than 20 percent and 10 percent, respectively, of the initiation of multiple partnerships. The National Commercial Bank
world’s oil and gas reserves, the resource-rich Kingdom remains (NCB) estimates that outstanding housing credit is likely to reach
committed to economic diversification. US$12.3 billion by the end of 2010.
Investment opportunities Economic powerhouse
According to a 2008 report by the Council of Saudi Chambers of The Kingdom has ambitious plans to build a total of six
Commerce, the real estate industry will achieve 6.7 percent growth economic cities and construction has commenced on several
over the next five years through commercial and residential of the sites. In June 2007, work began on the US$30 billion Jizan
projects, in addition to demand for land and homes. Other Economic City, by Saudi Binladin Group. Construction of the
PREVIEW Cityscape Saudi Arabia
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