Saudi Arabia’s Real Estate Sector Poised for Growth in 2024: Insights from S&P Report
In a recent report by S&P Global, the real estate landscape of Saudi Arabia is forecasted to experience a significant upsurge in transactions throughout 2024, propelled by strategic investments under Vision 2023. Titled “GCC Real Estate: How Credit Stories Have Evolved,” the report highlights the Kingdom’s anticipated economic growth of up to 3 percent within the Gulf Cooperation Council (GCC) region for the current year.
The projected rise in real estate activity is attributed to sustained expansion in oil-related sectors and a notable increase of up to 5 percent in non-oil economic activities, particularly evident in Saudi Arabia and the UAE.
Addressing the Kingdom specifically, the report notes a decline in real estate transactions in 2023 due to sensitivity towards high interest rates and price hikes. However, it anticipates a robust demand in the coming years, bolstered by investments aligned with Vision 2030, aimed at attracting new businesses and expatriates to the country.
Furthermore, the report underscores the potential catalysts for the mortgage sector, particularly the decline in interest rates from the latter half of 2023 and the introduction of a new visa regime enabling foreigners to own real estate. These factors are expected to stimulate demand and fuel new construction projects.
In exploring the opportunities and risks within GCC real estate markets, the report identifies population growth, government reforms supporting businesses and expat influx, as well as technological advancements, as key drivers for the sector. Moreover, it expresses optimism for a rebound in tourism and hints at the possibility of interest rate declines in the latter half of 2024, potentially enhancing affordability.
However, the report acknowledges geopolitical tensions as a persistent risk factor, with potential repercussions on global and regional economies. In Riyadh specifically, the shortage of real estate is highlighted as a factor contributing to upward pressure on prices, potentially deterring some buyers amidst high mortgage rates.
Moreover, a slowdown in the global economy could dampen demand from foreign buyers, while fluctuations in oil prices may impact regional buyer interest.
The report also predicts a cooling of Dubai’s residential property market in the next 12 to 18 months due to increased supply and global economic pressures. Nevertheless, developers in the emirate have fortified their financial positions, enhancing credit health in preparation for the anticipated cyclical slowdown.
Meanwhile, Abu Dhabi’s residential real estate market, characterized by a more moderate appreciation compared to Dubai, suggests a lower risk of market reversal.
As for Qatar, the real estate sector is undergoing a cyclical correction following the boost related to the World Cup in November-December 2022. Oversupply issues have led to price and rental declines, with pressures expected to persist in the coming years despite limited new supply.
In terms of the overall outlook, over 85 percent of GCC-rated real estate companies exhibit a stable outlook, indicating S&P’s expectation of steady operating performance. Despite differing dynamics across GCC countries, most rated real estate companies have restored or surpassed their 2019 rating levels, reflecting a resilient credit quality within the sector.
Conclusion:
Saudi Arabia’s real estate sector stands on the brink of substantial growth in 2024, underpinned by visionary investments and favourable economic conditions. While challenges persist, the sector demonstrates resilience and adaptability, poised to navigate through evolving market dynamics and seize emerging opportunities for sustainable development and prosperity.