Saudi Arabia's $200 billion real estate bonanza.

Author:Smith, Pamela Ann
Position::Business/Saudi Real Estate
 
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AS RAMADAN DRAWS TO A CLOSE AT the end of August and the long hot days of summer begin to cool, Saudi investors--large and small--will emerge to take a new look at the state of their investments. And one of the things, aside from the Tadawul--the Saudi stock exchange--they will be looking at closely is the state of the domestic real estate market. They, along with other investors from the Gulf and abroad, may be in for a pleasant surprise.

Jones Lang LaSalle, the international property group, estimates the kingdom's real estate sector could grow by as much as 5.7% by the end of this year, compared to 4% in 2010 and zero in 2009. That is in marked contrast to almost everywhere else in the GCC--except Qatar--where the property market has yet to recover fully from the global financial recession of 2008 and 2009.

By the end of this decade, the total value of new projects, both public and private, in the Saudi holy cities of Mecca and Medina alone could be worth some $120 billion, according to the Riyadh-based Saudi-French bank, Banque Saudi Fransi. Another $67 billion is expected to be spent on new housing--both houses and apartments--for young Saudis, following King Abdullah's announcement earlier this year of a massive $130-billion-dollar increase in the country's budget expenditure.

"Affordable housing was the largest single component" of the King's stimulus package, observes Soraka Al Khatib, co-head of Jones Lang LaSalle Saudi Arabia. This "reflects the government's prioritisation of housing its young and growing population. Although the package," she added, "will have several wide-ranging implications, one of the most important is establishing structures--like public-private partnerships--that facilitate the delivery of such large-scale, critical projects."

The international rating agency, Moody's, said in June that its outlook for Saudi Arabia, compared to elsewhere in the Gulf, is "more positive", especially in the residential market where, it noted, a large, growing and young population has built up demand. "While this pent-up demand has been visible for many years, a lack of funding combined with a shortage of affordable housing has constrained growth in the market," Moody's commented. "However, this could change with a new law on mortgage financing by the Saudi Arabian Shura Council."

New era

"The global economic slowdown and the regional political unrest have had no impact on our projects and programme across the kingdom," the...

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