In Saudi, Over 1 million new homes due by 2030. 7.4 million sqm of new retail and 7.7 million sqm of new offices expected, 362,000 new hotel rooms planned and under construction.
Riyadh : Since the unveiling of Vision 2030 in 2016, projects containing 1,048,000 residential units have been announced, 4% of which have already been completed, with the rest due by 2030, according to global property consultancy Knight Frank’s annual Saudi Giga Projects Report for 2024.
Knight Frank says that the total value of real estate projects announced since 2016 now stands at US$ 1.3 trillion, a rise of 4% on 2023, with US$ 164bn worth of real estate contracts awarded, the largest of which is for NEOM (US$ 28.6bn).
Faisal Durrani, Partner – Head of Research, MENA, said: “We have seen a 58.5% rise in the number of new homes that have been announced around the Kingdom over the last 12-months. This incredible increase is connected to the government’s concerted efforts to boost home ownership rates to 70% by 2030, from close to 64% today.
“The unprecedented response by private and public-sector-linked developers cannot come soon enough. Indeed, in Riyadh, which sits at the epicentre of the economic transformation of Saudi Arabia, apartment prices have climbed by 58% over the last three years, while villa values have climbed by 38% over the same period and at SAR 5,155 per square meter are now higher than those in Jeddah for the first time. These substantial rises have of course been supercharged by the high levels of job creation in the capital which is attracting domestic and international migrants. And developers have responded. 32.5% of the Kingdom’s new housing stock will be built in the capital, highlighting the strategic importance of Riyadh as the economic heart of Saudi.”
Residential transactions, which accounted for 61% of all real estate deals by total value during the first half of 2024, registered a 41% increase in the number of deals to just under 91,860 sales. While the value of residential transactions increased by 48% to SAR 77.6bn over the same period.
Government initiatives aimed at boosting housing supply and affordability have also been instrumental in driving up sales activity this year. The government has launched multiple housing projects, for instance, under the Sakani and Wafi programs to boost homeownership among nationals, with these efforts now extending to secondary and tertiary cities across the country. By the end of 2023, the percentage of Saudi homeowners had reached 63.74%, a 16.7 percentage point increase on 2016, when the National Transformation Plan was unveiled and also ahead of the government’s 2023 target of 63% (MOMRAH).
Susan Amawi, General Manager, KSA added: “The widely anticipated changes to foreign ownership laws are expected to inject further momentum into the market and will help to address the risk of an oversupply of luxury housing that appears to be the focus of many developers around the Kingdom. Additionally, our research suggests that there is a significant increase in demand for mid and low-end residential properties. This trend stems from potential buyers battling with affordability challenges, which have been exacerbated by notable price hikes over the last two years. The situation is further intensified by a substantial rise in interest rates, jumping from just 1% in 2021 to 6% today.”
In Riyadh, Knight Frank says 4.6 million square metres of news office space is due to be completed by 2030, along with 2.6 million square metres of new retail. Furthermore, 28,800 new hotel rooms (from c. 22,300 today) are also due to be delivered by 2030.
The development plans unveiled to date will receive a further significant boost as new projects connected to the 2030 World Expo and the FIFA World Cup in 2034 unleash a slew of new developments across the city, according to Knight Frank.
Indeed, the 2030 World Expo is expected to add as much as US$ 7.8bn in new economic activity to the capital over the next six years (Rajih Capital).
Dubai residential prices jump 21.3% in a year amid tight supply
OFFICE MARKET: Away from the residential sector, the flood of international businesses, spurred by the Regional HQ program, designed to encourage international businesses to hub out of Riyadh, combined with those flocking to the Kingdom to capitalise on the economic transformation and those expanding has placed pressure on the limited office supply across the country, with Grade A vacancy rates in Riyadh for instance slipping to an all-time low of just 3%, while Grade A rents have climbed by 51% over the last three years alone to SAR 2,210 per square metre.
Harmen de Jong, Regional Partner – Head of Consulting, said: “In line with global trends, businesses have a laser like focus on occupying best-in-class Grade A office space, not least because of the proven links between occupying high-quality offices and talent attraction and retention. This demand for Grade A space is also being catalysed by international businesses with global mandates to secure nothing less than ESG-rated space, with many willing to pay a premium for the privilege for doing so.
“While Grade A stock remains in short supply, relief is coming. Over 7.7 million square metres of new office space is expected around the Kingdom by the end of 2030, with nearly 60% of this coming to Riyadh.”
HOTEL MARKET: Elsewhere, the Saudi hospitality market continues to blossom, with authorities recently increasing their 2030 visitor target to 150 million following the breeching of the previous 100 million goal in 2023. This figure was underpinned by the arrival of 27.4 million international visitors during 2023, which positioned the Kingdom as the 13 most visited country in the world, just behind the UAE (28 million).
Amar Hussain, Associate Partner, Research, explained: “US$ 110bn will be required to deliver the ambitious pipeline of new hotel rooms around the Kingdom. By 2030, we expect that 65% of the total hotel supply will fall within the 4- and 5-star categories, highlighting a clear opportunity for developers to introduce more mid-market properties to cater to a wider range of international travellers. This will be key in ensuring the 150 million 2030 visitor target is achieved.”
The resumption of religious tourism in the wake of the pandemic, increased business travel, a growing number of international events, and the expansion of cultural and entertainment offerings are contributing to the robust performance of Saudi Arabia’s hospitality market.
Citing STR Global data, Knight Frank says that between January and May 2024, ADR levels in Saudi Arabia increased by 2.4%, reaching US$198, while occupancy levels increased to 64%, up from 63% over the same period last year. As a result, RevPAR grew by 2.5% to US$ 126.
