Real Estate - Updates
The real estate sector has seen a 20 % increase in investment by Gulf nationals in the Saudi real estate sector this year compared to last year, with investments totaling 14 billion riyals, A number of real estate investors confirmed that the capital flowing into the Kingdom comes from major real estate companies with a strong presence in the Gulf market. The real estate projects in which Gulf investors have invested are distinguished by their locations, which are among the Kingdom’s most prominent tourist destinations. Kuwaiti investors are the most active in the Asir region, with high investment rates, while investors from other countries focus their investments on areas outside the Haram area but close to the Two Holy Mosques and the Western Region.
Saudi Arabia’s Most Affordable Real Estate
Abdulaziz Al-Azab, a member of the National Real Estate Committee at the Council of Saudi Chambers, explained that Saudi real estate is the most affordable in the Gulf, as evidenced by the rise in Gulf investments in the Kingdom, which have risen by 20 % this year, particularly among Kuwaiti investors who are investing in and owning real estate in the Asir region at high rates. As for other investors from Gulf countries, their investments are concentrated in areas outside the Haram area and close to the Two Holy Mosques—particularly in the Western Region. This is a genuine competitive factor for Gulf investors in the flow of Gulf capital into the Saudi real estate sector, indicating that there is growing demand in this regard.
For his part, Engineer Abdullah Al-Ahmari, Chairman of the Real Estate Valuation Committee at the Jeddah Chamber of Commerce, said: “Real estate prices in the Kingdom’s cities vary depending on the city’s importance, and Jeddah is among the highest-priced areas, followed by Mecca and Medina compared to other Gulf countries. There has been a rise in the rate of purchases by Gulf investors in the Saudi real estate sector, particularly given their well-informed awareness of the housing crisis in the Kingdom due to the slow implementation of projects, Furthermore, some Gulf real estate companies that have entered the Saudi market specialize in tourism investments, which rely on building residential units intended for rent during the Kingdom’s tourist seasons through projects ranging from resorts to hotels.
Housing Projects
On the other hand, Awad Al-Zahrani, a member of the Real Estate Committee at the Jeddah Chamber of Commerce, said: “As a result of the Ministry of Housing stepping in to implement housing projects and introduce new real estate products, there may be a price correction, which could lead to a 30 % adjustment in real estate prices when the Ministry of Housing injects liquidity and distributes residential units. He noted that the proportion of Gulf investors is negligible, and may be limited to private ownership only. He noted that there is still a housing crisis due to the Ministry of Housing’s failure to inject sufficient liquidity to meet the high level of demand,
Allowing citizens of GCC countries to own real estate in other member states is one of the ten pathways to the Gulf Common Market outlined in the 2001 Economic Agreement, under which natural and legal persons from GCC countries are treated in any member state the same as that state’s own citizens, without distinction or discrimination.
Mortgages and Real Estate Financing
The year 2013 saw remarkable progress in mortgage and real estate financing systems across GCC countries, and work is currently underway to adopt the final versions of mortgage system regulations. These will address many of the challenges facing the real estate market and enable all segments of society to access . At the same time, these systems will provide high-quality investment opportunities for financing channels, with carefully assessed risk levels and high, stable rates of return and profits over the long term.
Article 8 of the Unified Economic Agreement stipulates that real estate ownership is permitted, and Article 3 of the Economic Agreement similarly stipulates equal treatment among GCC citizens regarding real estate ownership, however, this was subject to a number of restrictive regulations, particularly regarding the ownership of undeveloped land, which were gradually relaxed until the latest regulation on real estate ownership was issued during the 23rd session of the Supreme Council (December 2002), which was free of most of those restrictions. It is well known that, since its implementation, the Gulf Common Market has contributed to deepening the concept of economic citizenship.
Experts consider the real estate market in the Kingdom to be stable and secure despite the global crisis that shook the United States, as the Kingdom’s real estate market was not adversely affected, but rather experienced uneven growth. They point out that the delay in finalizing the mortgage system is actually a positive development, as the authorities overseeing its drafting drew on lessons from the global financial crisis to formulate a balanced system that protects people’s rights.
Restrictions on real estate ownership by citizens of Gulf Cooperation Council (GCC) countries for residential and investment purposes were lifted in early 2011, in a move aimed at promoting Gulf citizenship, and is consistent with the decisions of the Common Market, which took effect in early 2008.
