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The value of Saudi Arabia’s real estate and infrastructure projects launched in recent years have crossed $1.25 trillion in the Kingdom, but affordability remains a key concern in the residential sector, according to a new study.
The total value of commissioned projects has crossed $250 billion in the country, with housing developments accounting for a large part the country’s pipeline as it targets a population forecast of 50 million by 2030, according to the findings from the latest Saudi Giga Projects Report by real estate consultancy firm Knight Frank.
More than 600,000 residential units are currently in the pipeline, with Saudi capital Riyadh accounting for 18% of all real estate and development projects underway, totalling some $229 billion; this includes plans to accommodate over 241,000 homes by 2030, the report said.
“… The volume of residential units planned [in Saudi Arabia] has risen to 660,000 units, up 30% in the last 12 months, which will come as welcome news to house hunters prevented by the recent spike in values, which has underpinned a nation-wide decline in the volume of homes being sold,” said Faisal Durrani, Partner – Head of Research, Middle East & North Africa. “That being said, affordability is still a key hurdle for many buyers and so price points for the new inventory will be critical to reigniting domestic demand.”
A shortage in Grade A office space has also been a concern in financial hubs such as Riyadh, with development projects underway to address this market gap as well to 3.6 million sqm of office space in the Saudi capital, with a nation-wide plan that takes that figure up to 6 million sqm or more.
“Separately, the office pipeline is steady at 6 million sqm. This figure has of course been influenced by the 300,000 square metres of office projects that have been completed since last autumn. The swelling of the office pipeline is set against a backdrop of a severe shortage of prime Grade A space in cities such as Riyadh, which stands in stark contrast to other global centres where occupancy levels still trail pre-pandemic levels,” Durrani continued, adding: “Elsewhere in the commercial market, 5.3 million sqm of retail space is now planned, with a further 289,000 hotel rooms that will go some way to supporting Saudi Arabia’s goal of hosting 100 million visitors by 2030, up from around 17 million last year, which made the Kingdom the 14th most visited nation in the world.”
Beyond Riyadh
Away from Riyadh, Saudi Arabia’s western provinces have been the focus of Giga project developers, with a total of $ 687 billion of projects expected to be completed by 2030, including the $500 billion super-city, Neom.
According to Harmen de Jong, Partner – Head of Strategy & Consultancy, Knight Frank Saudi Arabia, even as $70 billion worth of projects have now been awarded at Neom, 45% of which has been completed, hurdles remain.
“The challenge for the nation’s giga project developers will be to cater to and appeal to domestic buyers,” he stated, adding that their research shows that two-thirds of whom have home budgets of under SAR 1.5 million. “With most giga projects expected to launch residential product at over $1 million, bridging this gap between demand and expectations will undoubtedly emerge as a key consideration going forward.”
(Writing by Bindu Rai, editing by Seban Scaria)
