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Saudi Arabia’s infrastructure projects top USD 1.25 trillion tally, affordability concerns remain

A shortage in Grade A office space has been a concern in Saudi Arabia’s financial hubs, as the ongoing development projects are aiming to address this market gap

The value of Saudi Arabia’s real estate and infrastructure projects launched in recent years has crossed USD 1.25 trillion in the Kingdom, but affordability remains a key concern in the residential sector, according to a new study by real estate consultancy firm Knight Frank.

As per the report, the total value of commissioned projects has crossed USD 250 billion in the Gulf country, as housing developments account for a large part of the country’s overall infrastructure blueprint as it targets a population forecast of 50 million by 2030.

Over 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 USD 229 billion. This includes plans to accommodate over 241,000 homes by 2030.

“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 nationwide decline in the volume of homes being sold,” said Faisal Durrani, Partner – Head of Research, Middle East & North Africa, while interacting with Zawya.

“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,” the official added further.

A shortage in Grade A office space has also been a concern in the Kingdom’s financial hubs, as the ongoing development projects are aiming to address this market gap.

“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 remarked, while 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.”

Saudi Arabia’s western provinces will witness a lot of infrastructure activities as the regions have a total of USD 687 billion worth of projects in their pipeline, expected to be completed by 2030. One such high-ticket project is the USD 500 billion super-city called Neom.

According to Harmen de Jong, Partner – Head of Strategy & Consultancy, Knight Frank Saudi Arabia, despite USD 70 billion worth of projects being awarded at Neom and 45% of these getting completed, hurdles have remained.

“The challenge for the nation’s giga project developers will be to cater to and appeal to domestic buyers,” he stated.

“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,” the official concluded.

Talking about Saudi Arabia’s real estate sector, the Kingdom, in August 2023, launched a new platform to boost its real estate sector. The platform, known as ‘Real Estate Market’, facilitates real estate transactions and provides various e-services for property owners and buyers.

The initiative is part of the ‘Real Estate Wealth Digitization’ roadmap, which is one of the Saudi government’s projects under the national transformation programme.

The ‘Real Estate Market’, apart from allowing users to access reliable information about the value of real estate transactions in their preferred locations, also enables the interested parties to manage their property portfolios and perform subdivision and merger of title deeds using the real estate identity, in cooperation with the Ministry of Municipal and Rural Affairs and the Saudi Central Bank.

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