Long-term outlook of Saudi real estate remains positive: report

The outlook for Saudi Arabia’s real estate sector remains optimistic in the long term, supported by several government initiatives aimed at stimulating the market, Itqan Capital said in a recent report.

The residential property market is expected to pick up in the long run as government housing initiatives tackle the shortage of affordability and increase homeownership rates for Saudi citizens in line with Vision 2030. 

Sale and rental prices will remain under pressure due to strong project pipeline, the report said, adding the market is expected to regain momentum as supply adjusts to more affordable, medium-sized units.

However, 2019 saw the number of project completions slowing down. Sales and rental markets remained subdued, as demand shifted towards smaller and more affordable units.

Recovery in the hospitality sector

On the hospitality front, Itqan Capital expects the hospitality sector to recover in the short- and medium-term, thanks to the government’s diversification efforts, tourism initiatives and major infrastructure projects. 

The Saudi government has started work to create viable leisure-based destinations through mega-projects such as the Red Sea Project, Amaala and Al Qiddiyah. In addition, the introduction of tourist visa is bound to boost the tourism sector significantly.

Office market to be tenant favorable

According to the consultancy, the office market is likely to remain tenant favorable as supply increases while demand remains sluggish.

“We expect the office market, particularly high-quality Grade A office space with better connectivity and amenities, to regain some momentum,” it said.

Landlords are expected to become more responsive to the current economic climate by shifting parts of their premises to flexible smart offices targeting the young entrepreneurs, the report noted.