{"id":65204,"date":"2024-05-07T13:50:11","date_gmt":"2024-05-07T10:50:11","guid":{"rendered":"https:\/\/amlak.net.sa\/?p=65204"},"modified":"2025-11-26T04:00:42","modified_gmt":"2025-11-26T04:00:42","slug":"%d8%b4%d8%b1%d9%83%d8%a7%d8%aa-%d8%a7%d9%84%d8%aa%d8%b7%d9%88%d9%8a%d8%b1-%d8%a7%d9%84%d8%b9%d9%82%d8%a7%d8%b1%d9%8a","status":"publish","type":"post","link":"https:\/\/amlak.net.sa\/en\/65204\/","title":{"rendered":"Reports: Standard & Poor's expects significant growth for Saudi Arabia's real estate developers"},"content":{"rendered":"

I expected Standard & Poor's<\/a><\/strong> According to the credit rating agency, real estate development companies in Saudi Arabia are expected to experience significant growth, driven by a supply shortage and government support for the real estate and housing sectors.<\/p>\n

In a report, the agency stated that demand in Saudi Arabia\u2019s housing sector is supported by the government and its various initiatives, particularly the Kingdom\u2019s Vision 2030, which aims to increase the rate of home ownership among citizens to 70%, Therefore, the government is expected to continue supporting and financing new housing supply.<\/p>\n

Standard & Poor\u2019s added that the Saudi government expects the population to grow and the proportion of expatriates to rise to 50% from 42% by the end of the current decade, noting that its projections are based on an estimated annual population growth rate of between 3 and 4% during the period from 2024 to 2027.<\/p>\n

It is also expected that the capital, Riyadh, alone will see a significant increase in population, which will put additional pressure on Real estate market<\/a> <\/strong>which is already facing a supply shortage in the city, as the new supply is unlikely to meet the expected demand.<\/p>\n

Growth in Mortgage Lending\u00a0<\/strong><\/span><\/p>\n

The agency also predicted that mortgage lending would continue to grow, albeit at a slower pace than before due to market maturity, an expected rise in corporate borrowing as projects related to Vision 2030 are implemented, and a greater shortage of liquidity in the banking system.<\/p>\n

Standard & Poor\u2019s said that robust demand will continue to drive revenue and profits for real estate development companies in Saudi Arabia in 2024\u20132025, with a slight positive impact from an expected cut in interest rates. As projects expand, S&P expects corporate profitability to stabilize following the improvement seen in 2023.<\/p>\n

The agency expects off-plan real estate sales to rise, given the Kingdom\u2019s housing supply needs and the growing demand for financing.<\/p>\n

She said that off-plan sales would reduce the sector\u2019s financing needs, as they would provide upfront financing for construction by accelerating cash collection and thereby reducing risks for development companies.<\/p>\n

She added that real estate transactions on the platform increased by 52% in the first half of 2023, and she expects this strong growth to continue, supported by a 9% increase in the number of developers on the platform during the same period.<\/p>\n

Growing Demand for Commercial Real Estate<\/strong><\/span><\/h4>\n

In its report, the agency also predicts that rental rates for office space in Saudi Arabia will rise as new companies seek to secure headquarters for their businesses. It noted that, as of last January, foreign companies awarded government contracts in the Kingdom are now required to establish their regional headquarters in Saudi Arabia.<\/p>\n

She added that Riyadh would benefit directly, as this is expected to boost demand for office real estate there, noting that demand from government-affiliated companies in Riyadh is also driving up office rents.<\/p>\n

Stimulating Demand for Real Estate Among Foreigners\u00a0<\/strong><\/span><\/h4>\n

Meanwhile, Standard & Poor\u2019s believes that the Special Residency Program introduced by the Kingdom in early 2024 will serve as a catalyst Demand for Real Estate from Foreign Buyers<\/a><\/strong> In the Kingdom, it is noteworthy that residential real estate prices in Riyadh have been rising since 2020, driven by strong domestic demand, but with the recent simplification of ownership and residency rules, demand from international buyers is expected to rise, which could help real estate transactions return to growth after a weak performance in 2023.<\/p>\n

She noted that, according to the Kingdom\u2019s 2020 census, less than 5% of residential units in Saudi Arabia are owned by non-citizens, indicating significant growth opportunities. Under the new program, foreign buyers will be able to purchase real estate in the country.<\/p>\n

Standard & Poor\u2019s also expects Riyadh to attract the lion\u2019s share of international attention, but noted at the same time that the high required real estate investment of 4 million riyals (approximately $1.07 million) under the program may deter many potential buyers and make it primarily targeted at high-net-worth individuals.<\/p>\n

Stability in the Saudi Market\u00a0<\/strong><\/span><\/h4>\n

Standard & Poor\u2019s also stated in its report that \u201dthe real estate market in Saudi Arabia is inherently more stable than that in Dubai, which mitigates the risk of rapid fluctuations in demand that could lead to pricing pressures.\u201d.<\/p>\n

The agency attributed this to a number of reasons, including the fact that demand for real estate comes from the largest and most stable segment of the population in Saudi Arabia, where expatriates make up a smaller portion of the population, amounting to about 42%, compared to Dubai, where the proportion of expatriates exceeds 90%, Therefore, any potential decline in the expatriate population, particularly during periodic recessions, will have a much smaller actual impact on home prices in Saudi Arabia.<\/p>\n

She added that the second reason is the government's support for housing demand through its various initiatives, such as Vision 2030.<\/p>\n

Alternative Sources of Funding<\/strong><\/span><\/h4>\n

With regard to the mortgage market, Standard & Poor\u2019s said that the shortage of liquidity in the Saudi banking system means there is a need for alternative sources of financing, particularly given the scale of projects across the country and in various sectors.<\/p>\n

She explained that companies Real estate development<\/a> <\/strong>Companies listed in Saudi Arabia typically use fixed-term loans and revolving credit facilities from local banks for most of their financing. She added that companies\u2019 capital structures typically consist of bank debt and a limited amount of sukuk, with no bond issuances or sustainability-linked debt instruments.<\/p>\n

She noted that this stands in stark contrast to the more diversified capital structures of Dubai-based real estate development companies rated by the agency. She said that by the end of 2023, sukuk accounted for 80% of the capital of Emaar Properties, Damac, and BNS Investments (Shoba).<\/p>\n

Growth of Real Estate Development Companies\u00a0<\/strong><\/span><\/h4>\n

As Saudi capital markets continue to evolve, the agency expects these markets, along with foreign investment, to play an increasingly significant role in financing the growth of real estate development companies.<\/p>\n

Standard & Poor's believes that real estate developers will increasingly need to tap into domestic and foreign debt markets, given that financing costs remain relatively high.<\/p>\n

She notes that, for some real estate development companies, this area of expansion is new, and investor interest in it has not been widely tested, particularly among small, privately owned companies.<\/p>","protected":false},"excerpt":{"rendered":"

Reading time: <\/span> 3<\/span> Minutes<\/span><\/span>Standard & Poor\u2019s credit rating agency has projected that real estate development companies in Saudi Arabia will experience significant growth, driven by a supply shortage and government support for the real estate and housing sectors. In a report, the agency stated that demand in Saudi Arabia\u2019s housing sector is supported by the government and its various initiatives, particularly the Kingdom\u2019s Vision 2030, which aims to increase the percentage of citizens who own homes \u2026 Read 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