_Branded residences drought?

Branded residences are a popular investment sector amongst global HNWI. Investing in a well-known international hotel brand offers security, especially in unfamiliar markets, with the added attraction of having access to luxury hotel services and amenities courtesy of an adjoining luxe hotel.

Faisal Durrani March 14, 2023

Untapped potential of the branded residential sector

Perhaps predictably, when asked about their understanding of branded residences, 72% of our GCC-based HNWI sample say they understand branded residence.

Among our respondents, 55% are looking to purchase branded residences anywhere in Saudi Arabia, and a further 19% are interested in purchasing branded residences anywhere in the UAE.

For HNWI based in the UAE, this percentage rises to 21%, with Saudi Arabia still leads at 53%, underscoring the depth of demand there is for both branded residential property in the region as well as in Saudi Arabia.

As already outlined, the UAE, specifically Dubai, has the world’s highest concentration of branded residential properties, with luxury brands ranging from the Ritz Carlton to The Dorchester. And one of the biggest buyer groups of Dubai’s branded residential property is Saudi nationals. To date, a very limited branded residential offering in the Kingdom means this sector remains a significant and untapped vein of opportunity.

Significant premiums

Branded residential property often comes with significant premiums, and our HNWI respondents appear to be aware of this. Indeed, over half of our respondents (63%) are willing to spend over US$5,500 psm (c. SAR 20,000 psm) on a branded residential property.

When analysed by net worth, naturally, the percentage of those allocating higher budgets increases. For those with a net worth of over US$ 1 million, over a third (35%) claim they will spend over US$8,500 per sqm (c. SAR 32,000 psm), compared to just 11% for those with a net worth of less than US$1 million.

High expectations

Unlike Saudi nationals in Survey 1, where most (45%) plan to use a potential branded residence purchase as their main home, Survey 3 shows that this figure stands at only 11% for GCC-based HNWI. While 24% plan to use it as a holiday home, the majority (40%) hope to benefit from the high rental yield potential.

Furthermore, the expectation of significant capital growth is also high amongst our respondents to Survey 3. Around a third (29%) anticipate achieving 7-8% growth p.a. during the first 3-5 years, and 26% expect prices to rise by 9-10% p.a. over the same time frame.