Competition in the Gulf property sector is set to heat up, with the region’s largest economy, Saudi Arabia, gearing up to open its property market for foreign investors, including its religious cities Makkah and Madinah.
Property market pundits say that the opening of the Saudi market will not only provide another attractive and stable avenue for foreign investors, similar to the UAE, but this will also be an opportunity for regional and global developers to expand their portfolio to the region, where the return on investment is much higher than many other major countries which have reached the maturity level.
The regional residential property market is already facing a shortage of homes, which will also attract more investment and will lift the prices as well. According to Statista, led by Saudi Arabia, the GCC countries were short of over 6 million housing units by 2022.
Currently, the UAE, a pioneer in introducing freehold property in the Gulf, leads the region in terms of the offerings of freehold properties. Dubai allows people of any nationality to buy property in nearly three dozen areas. Similarly, different areas in Abu Dhabi, Sharjah and other northern emirates also offer freehold properties. Real estate, according to the UAE Central Bank, is the sixth most important non-hydrocarbon sector, accounting for 8.2 per cent of non-oil GDP.
In addition, Bahrain has around 10 areas, while Qatar offers 10 localities where foreigners can buy property. Neighbouring Oman also allows expats to buy property in certain projects in the Sultanate. In the regional bloc, the kingdom will be the latest entrant to offer freehold property to expatriates as it is in the process of finalising laws surrounding it.
Recently, Abdullah Alhammad, CEO of Saudi Arabia’s Real Estate General Authority (Rega), said that work is in the final stages to allow non-Saudis to own property in all parts of the kingdom, including the cities of Makkah and Madinah – the two holiest cities for Muslims. While he acknowledged that property prices in the kingdom are high due to the gap between supply and demand, he added that the new law will be published soon.
The real estate sector accounts for nearly 5.1 per cent of the kingdom’s GDP and 12.8 per cent of the non-oil GDP. He added that foreigners will be able to buy all kind of properties including residential, commercial and agriculture. However, he assured that the sector will be monitored for any kind of ill-practices, and that solutions are being developed with any such challenges. In order to increase construction activity in the country and build more homes, the Saudi government imposed a 2.5 per cent tax on undeveloped land bought by landowners in urban areas.
Global ratings firm S&P foresees sustained property market growth in Saudi Arabia, fuelled by Vision 2030 and the Iskan programme, with $1 trillion slated for real estate and infrastructure projects. At least eight new cities are planned in the kingdom, with more than 1.3 million new homes by end-2030. Numerous projects are also slated for existing main cities, with Riyadh set to become one of the 10 largest cities in the world.
Industry executives say that Makkah and Madinah will see strong interest from Muslims around the world, while other tourist-focused cities such as Neom, the Red Sea Project and Qiddiya will attract more international buyers. As a result of the opening up of the property sector by Gulf countries, the contribution of the real estate market to the region’s overall economy will increase, and help the regional government diversify away from the oil income. The benefits of freehold laws will not be limited to residential and commercial properties, but also expedite the development of affiliate sectors such as theme parks and hotels.
