_Saudi Arabian real estate market: 2018 review
While we see the current situation prevailing in the short term, we remain optimistic for the longer term due to the various government initiatives aimed at stimulating the real estate market whilst encouraging the private sector to take a key role in this process, as part of the recently introduced strategic reforms.
The approval of regulations for the use and listing of REITs in Saudi Arabia is a case in point, as it signals an important step in the government’s drive to boost private sector participation in the sector and increase transparency in real estate markets where visibility around asset performance, ownership and legislation are key to attracting capital to the sector.
Moreover, the implementation of various urban regeneration initiatives including mixed-use communities and large-scale infrastructure projects is expected to act as a catalyst for the real estate market. The Riyadh Metro is one of the key infrastructure projects that is being implemented and which is set to dramatically alter the dynamics of both residential and commercial real estate markets when delivered.
Outlook
GDP growth is expected to remain on a positive trajectory over the coming years, averaging 2.2% over the next five years according to the IMF estimates. Generally, the outlook and sentiment for Saudi Arabia’s economy remain cautiously positive and the recovery in economic growth that occurred in 2018 is yet to translate into a substantial improvement in economic conditions.
Employment growth is forecast to remain supported by the various initiatives aimed at boosting youth, women and Saudi nationals’ participation in the workforce. In the short term, this will be balanced by rising pressures on the expat labour market resulting from the impact of government fees and Saudization plans on non-Saudi employment figures.
In line with the Vision 2030 and the National Transformation Plan (NTP), the restructuring of the economy to decrease the Kingdom’s reliance on the hydrocarbon sector and to support stronger non-oil growth looks set to remain a central element of economic policy over the coming years, yet this is likely to be a gradual process, which requires some time to come into effect.
For further insights on the Saudi Arabia real estate sector, please contact Raya Majdalani
Other Knight Frank Saudi Arabian reports that may be of interest:
Saudi Arabia Hospitality Report
Saudi Arabia Office Market Report