A pressing question arises: Why is the Kingdom’s real estate market holding up so remarkably well despite the turmoil in many other investment sectors? At the same time, real estate experts rule out the possibility of capital fleeing the Saudi real estate sector to other attractive financial markets because the real estate market—quite simply—has proven to be one of the best investment sectors, ranking second in terms of GDP after the oil sector.
Attracting Investments
According to economic analysts, the sectors that are most stable, resilient, and capable of attracting more investment are real estate and finance. These are among the most popular investment choices for Saudi citizens and offer lucrative returns compared to other sectors because these investments are considered largely safe.
Experts believe that the Saudi real estate sector has succeeded in attracting billions of riyals over the past decades in the form of investments from individuals and companies, noting that the Kingdom’s decision to open the Saudi financial market to foreign investors has had no impact—at least so far—on shifting investments from the real estate market to the capital markets, and investments in the sector exceed approximately two trillion riyals.
Further boosting activity in these sectors, the relevant authorities opened the door last June to foreign companies in the stock market, but under certain conditions that must be met by those companies and in the trading mechanism to prevent speculation, promote long-term investments, and gain expertise. In this regard, experts had predicted a flight of real estate funds to the stock market; however, nothing of the sort has occurred, which confirms the soundness and resilience of the real estate market’s economy. This resilience was further reinforced by the Ministry of Housing’s decision to involve the private real estate sector in its projects to provide housing support to citizens.
The Strength of the Real Estate Sector
The Saudi real estate sector draws its strength from the Kingdom’s severe housing crisis and the increase in demand relative to supply, which boosts the volume of investments flowing into the sector year after year, unlike in other countries where real estate markets have been affected by global economic crises and domestic economic conditions, such as the U.S. real estate sector, which collapsed in the wake of the global credit crisis in 2008 due to the abundance of real estate products and their widespread use as an investment tool rather than as a necessity for U.S. citizens.
Many believe that the real estate sector will maintain its investment volume for years to come, until the financial market regains its lost vitality and eliminates its volatility for investors, noting that the coming period will be positive for the sector and its projects, which will further increase the volume of these investments.
Strong Demand for Real Estate Investment
On the other hand, studies have confirmed an increase in investment flows into the real estate market in recent times, and predicted further investments in the coming period to complete housing projects, whether those being carried out for the Ministry of Housing or for individuals wishing to build their own homes, An increase in demand for real estate investment has been observed, especially after the Ministry of Housing’s vision and strategy in its partnership with the private sector became clear. This serves as a protective shield for the real estate market and prevents its funds from being diverted to other sectors, confirming that it is always (the dutiful son).
