Saudi Arabia Real Estate Market in Ramadan: Trends and Analysis
The Saudi Arabian real estate market has been a topic of interest for many investors and analysts. With the onset of Ramadan, the market is expected to experience changes that could impact the industry in various ways. Ramadan is an important month in the Islamic calendar, during which Muslims observe fasting, prayer, and reflection. The month-long observance affects business operations in the country, including the real estate sector.
During Ramadan, the Saudi Arabian real estate market experiences a slowdown in activity due to the reduced working hours. This is because many employees take time off to observe the holy month, leading to a decrease in the number of transactions and deals. However, this does not mean that the market comes to a complete standstill. Some investors use the low activity to make strategic moves, such as negotiating favorable deals or acquiring lower-priced properties.
Market Overview
The Saudi Arabian real estate market has been experiencing growth over the past few years, with a focus on residential, retail, office, and hospitality sectors. The following subsections will overview the economic and macroeconomic factors, Saudi Arabia’s Vision 2030, and real estate market growth.
Economic and Macroeconomic Factors
Saudi Arabia has a strong economy, with a Gross Domestic Product (GDP) of $793.97 billion in 2023. The country has maintained its economic stability despite the challenges posed by the COVID-19 pandemic. The government has implemented various economic reforms to reduce its reliance on oil and diversify its economy. The country’s unemployment rate has also been decreasing, with a rate of 4.9% in Q2 2023.
Saudi Arabia’s Vision 2030
Saudi Arabia’s Vision 2030 is a plan to transform the country’s economy and society. The plan aims to lower the country’s dependence on oil and diversify its economy, create job opportunities for its citizens, and improve the quality of life for its people. The plan also aims to increase the private sector’s contribution to the country’s economy.
Real Estate Market Growth
The Saudi Arabian real estate market has grown steadily over the past few years. The market size is expected to grow from $64.43 billion in 2023 to $94.19 billion by 2028 at a compound annual growth rate (CAGR) of 7.89% during the forecast period. The office sector has shown strong figures and occupier demand, especially in Riyadh, where stock levels remain low.
Overall, the Saudi Arabian real estate market is showing favorable growth, with a focus on diversification and economic stability. The country’s Vision 2030 plan aims to boost the economy further and create job opportunities, which will contribute to the growth of the estate market.
Residential Real Estate Dynamics
Housing Demand and Supply
The Saudi Arabian residential real estate market has experienced a decline in demand and supply in recent years. According to the Saudi Arabia Residential Market Review, the total number of real estate transaction volumes across all asset classes in Saudi Arabia slipped by -17% in 2023 to just over 177,000, while the total value of all deals declined by -9% to SAR 197.7 billion over the same period. Residential transactions, which accounted for 58.7% of all real estate deals by total value, saw a 32% decrease in home sales between January and June, with around 70,000 transactions recorded, down from 103,000 transactions in the previous year.
Residential Property Types
The residential property market in Saudi Arabia is dominated by villas and apartments. According to the CBRE – Saudi Arabia Residential Real Estate Market Review – Q3 2023, the total number of residential transactions totaled 61,473, equating to SAR 45.9 billion. The report also notes that there has been a shift in demand towards smaller, more affordable units, particularly apartments.
Price Performance and Trends
The average residential property price in Saudi Arabia has been downward in recent years. The same report by CBRE notes that the total value for residential transactions decreased by 11.3% between Q3 2022 and Q3 2023. However, the report also notes signs of stabilization in the market, with the decline in prices slowing down.
Affordable Housing Initiatives
The Saudi Arabian government has launched several initiatives to address the obstacle of affordable housing in the country. The Saudi Arabia Real Estate Market – Overview & Report Analysis notes that the government has launched the Sakani program to provide affordable housing to citizens nationwide. The program offers a range of financing options, including subsidized mortgages and rent-to-own schemes, to help citizens purchase their own homes.
In conclusion, the residential real estate market in Saudi Arabia has seen a decline in demand and supply in recent years, with a shift towards smaller, more affordable units. The government has launched several initiatives to address the issue of affordable housing, including the Sakani program. While the market has seen a price decline, there are signs of stabilization, with the decline in prices slowing down.
Commercial and Office Space Sector
Grade A and B Office Spaces
The commercial and office space sector in Saudi Arabia has grown steadily. Grade A office spaces in Riyadh saw a rent increase of 12.9% in Q2 2023, reaching SAR 1,900 per square meter. In Jeddah, the average rent for Grade A offices increased by 17.9% in Q3 2023, with an average rent of SAR 1,356 per square meter. The average rent for Riyadh’s Grade A offices increased by 13.0% yearly, reaching SAR 1,933 per square meter in Q4 2023. Jeddah’s Grade A offices saw their average rent improve yearly by 19.7%, arriving at SAR 1,406 per square meter.
Occupancy and Rental Rates
Despite the increase in rental rates, the occupancy rates for commercial and office spaces in Saudi Arabia have remained stable. The total number and total value of residential transactions fell by 7.0% and 11.3%, respectively, in Q3 2023. The purchasing manager index (PMI) for Saudi Arabia scored 57.5 for December in Q4 2023. The public sector remains the primary driver of office demand across Saudi Arabia.
Development and Investment
The commercial and office space sector in Saudi Arabia has been seeing a significant surge in demand from new international occupiers. Many new regional headquarters are expected to contribute SAR 67bn (US$ 18bn) to the economy and create 30,000 jobs by 2030. The Saudi Arabia Commercial Estate Market size is roughly calculated at USD 20.71 billion in 2023. It is expected to reach USD 31.35 billion by 2028, flourishing at a CAGR of 8.65% during the forecast period (2023-2028). Saudi Arabia’s real estate market has started to show an overall improvement in business activity, proceeding to a downturn caused by the pandemic.
In conclusion, the commercial and office space sector in Saudi Arabia has been seeing steady growth, with rental rates for Grade A and B office spaces increasing. However, the occupancy rates have remained stable, and the public sector remains the primary driver of office demand across Saudi Arabia. The sector is also seeing a significant surge in demand from new international occupiers, with many new regional headquarters expected to contribute significantly to the economy.
Retail and Hospitality Market
Retail Sector Trends
The retail sector in Saudi Arabia is anticipated to grow to SAR 596bn by 2024, becoming the largest market in the region. Emerging F& B and entertainment concepts are pivotal in redefining the Kingdom’s retail landscape and remain the primary drivers of footfall in retail developments. The steady demand for luxury retail also contributes to the retail sector’s growth.
Hospitality Sector Analysis
Saudi Arabia’s hospitality sector has shown promising growth in recent years. The average daily rate (ADR) and revenue per available room (RevPAR) have increased in several cities, including Riyadh and Jeddah. The occupancy levels in the hospitality sector are also improving, with an increase of 6.7 percentage points and 6.0 percentage points in Dammam and Khobar’s Grade A market, respectively. The hospitality sector is expected to significantly boost during Ramadan due to the increased demand for hotels and restaurants.
Impact of Ramadan on Occupancy
The month of Ramadan has a significant impact on the occupancy levels in the hospitality sector. This month, there has been a surge in demand for hotels and restaurants due to the increased number of visitors to the country. The occupancy levels in the hospitality sector are expected to increase during this period, leading to higher ADR and RevPAR. The hospitality sector is well-prepared to cater to visitors’ needs during Ramadan, with several hotels and restaurants offering special deals and promotions to attract customers.
In conclusion, the retail and hospitality sectors in Saudi Arabia have shown promising growth in recent years. The steady demand for luxury retail, emerging F& B and entertainment concepts, and the increased demand for hotels and restaurants during Ramadan are contributing to the growth of these sectors. The hospitality sector, in particular, is expected to boost during Ramadan significantly.
Industrial Real Estate and Logistics
Industrial Market Overview
The industrial real estate market in Saudi Arabia has been flourishing steadily in recent years, with a focus on developing the country’s non-oil sectors. The government’s Vision 2030 program has supported the sector, which aims to diversify the economy and reduce dependence on oil revenues. The program has increased industrial activity and investment, particularly in the manufacturing and petrochemical industries.
Logistics Sector Growth
The logistics sector in Saudi Arabia has been experiencing significant growth, driven by the country’s strategic location and the government’s efforts to improve infrastructure. The sector has been supported by developing new ports, airports, and highways, improving connectivity, and reducing transportation costs. The growth of e-commerce has also contributed to the expansion of the logistics sector, with companies investing in new warehouses and distribution centers to meet increasing demand.
Rents and Occupier Demand
The average industrial and logistics rents in Saudi Arabia have been relatively stable in recent years, with some regional variations. According to the latest data, average rents in Riyadh, Khobar, and Dammam have seen rental growth in the year to Q2 2023. However, Jeddah was the only city to record a decline in rents, with a fall of 2.3% in the year to Q2 2023. The occupier demand for industrial and logistics space has been strong, particularly in the major cities, focusing on high-quality facilities and modern infrastructure.
- The industrial real estate market in Saudi Arabia has been flourishing steadily in recent years.
- The logistics sector in Saudi Arabia has been experiencing significant growth, driven by the country’s strategic location and the government’s efforts to improve infrastructure.
- The average industrial and logistics rents in Saudi Arabia have been relatively stable in recent years.
- The occupier demand for industrial and logistics space has been strong, particularly in the major cities.
Saudi Arabia’s real estate market has started to show an overall improvement in business activity despite a downturn caused by the COVID-19 pandemic. The country’s industrial and logistics sectors have been particularly resilient, with strong demand from occupiers and investors. The government’s Vision 2030 program is expected to continue supporting these sectors’ growth as the country seeks to diversify its economy along with reducing its reliance on oil revenues.
Regional Focus
Real Estate in Riyadh
Riyadh’s real estate market has grown steadily. The demand for residential and commercial properties has been increasing, leading to a rise in property prices. According to recent reports, the median rent for Grade A offices in Riyadh increased by 13.0% year-on-year, reaching SAR 1,933 per square meter in Q4 2023. The city’s office sector figures and occupier demand remained strong over the last quarter of 2022.
Jeddah’s Property Landscape
Jeddah’s property market has witnessed a surge in demand for commercial and residential properties. The average rent for Grade A offices in Jeddah improved yearly by 19.7%, arriving at SAR 1,406 per square meter in Q4 2023. The city’s real estate market is expected to grow at a CAGR of 7.89% during the forecast period, reaching USD 94.19 billion by 2028.
Dammam and Khobar Markets
Dammam and Khobar’s real estate markets have grown significantly in recent years. The average occupancy rates in Dammam and Khobar’s Grade A market increased by 6.7 percentage points and 6.0 percentage points, respectively, to reach 82.2% and 81.0% in the year to March 2023. In Khobar’s Grade A market, average rents rose to SAR 1,080 per square meter, an increase of 8.0% in the year to Q1 2023.
Overall, the real estate market in Saudi Arabia has been showing steady growth, with demand for both residential and commercial properties on the rise. The cities of Riyadh, Jeddah, Dammam, and Khobar have been witnessing significant growth in their respective real estate markets, with rising property prices and increasing demand for Grade A offices.
Impact of Socio-Cultural Factors
Ramadan is a significant month in Saudi Arabia, and its impact on the real estate market cannot be ignored. The following subsections examine the effect of socio-cultural factors on the real estate market in Saudi Arabia during Ramadan.
Ramadan’s Effect on Real Estate Activities
During Ramadan, real estate activities in Saudi Arabia slow down as people focus on religious activities and family gatherings. The month-long fasting period can also lead to decreased productivity, affecting the pace of construction projects. Thus, real estate transactions and construction activities are generally slower during Ramadan.
Housing in Holy Cities
The holy cities of Mecca and Medina receive millions of visitors during Ramadan. This influx of visitors puts immense pressure on the housing market in these cities, leading to an increase in demand for short-term rentals. As a result, landlords and property owners in these cities can charge higher rents during Ramadan.
Urbanization and Population Growth
Saudi Arabia is experiencing rapid urbanization and population growth, putting pressure on the real estate market. During Ramadan, this pressure is amplified as more people travel to cities to participate in religious activities. This increased demand for housing can lead to higher rents and property prices.
In conclusion, Ramadan significantly impacts the real estate market in Saudi Arabia, particularly in the holy cities of Mecca and Medina. Real estate activities slow down during the month-long fasting period, and the influx of visitors during Ramadan puts pressure on the housing market in these cities. Furthermore, rapid urbanization and population growth are exacerbating the pressure on the real estate market in Saudi Arabia.
Investment and Foreign Interest
The Saudi Arabian real estate market has seen a significant investment and foreign interest increase in recent years. This trend is expected to continue throughout Ramadan and beyond as the government continues implementing policies to attract foreign investment.
Foreign Investment Trends
Foreign investment in the Saudi Arabian real estate market has risen recently. According to a JLL report, foreign investment in the Saudi Arabian real estate market reached USD 4.8 billion in 2023, up from USD 3.8 billion in 2022. This trend is expected to continue as the government implements policies to attract foreign investment.
Special Economic Zones
The Saudi Arabian government has established several special economic zones (SEZs) to attract foreign investment. These SEZs offer a range of incentives to foreign investors, including tax breaks, streamlined business registration processes, and access to world-class infrastructure.
Mortgage and Financing Landscape
The Saudi Arabian real estate market has seen significant developments in the mortgage and financing landscape in recent years. The government has implemented several policies to make it easier for Saudi citizens to obtain mortgage contracts and finance home purchases. This has led to increased housing demand, driving up property prices.
Overall, the Saudi Arabian real estate market is poised to grow and develop in the coming years. With a strong focus on attracting foreign investment and implementing policies to make it easier for Saudi citizens to obtain mortgage contracts, the market is expected to remain robust throughout Ramadan and beyond.
Policy and Regulatory Environment
Government Initiatives and Development Plans
The Saudi Arabian government has been implementing several initiatives and development plans to boost the real estate market in the country. One of the most notable initiatives is the National Transformation Program (NTP) 2020, which aims to diversify the economy and reduce the country’s dependence on oil revenue. The NTP 2020 includes several initiatives that are expected to have a significant impact on the real estate market, such as the development of new cities and the expansion of existing ones.
Another initiative is Vision 2030, a long-term plan to transform the country into a global investment powerhouse. Vision 2030 includes several initiatives expected to positively impact the real estate market, such as the development of the entertainment industry and the promotion of tourism.
Real Estate Regulations
The Saudi Arabian government has implemented several regulations to promote transparency and stability in the real estate market. One of the most significant regulations is the Real Estate Ownership Law, implemented in 2019. The law allows non-Saudi nationals to own property in certain areas of the country and has increased foreign investment in the real estate market.
Another regulation is the Real Estate Investment Funds regulation, implemented in 2016. The regulation allows the creation of real estate investment funds to expose investors to the real estate market without owning physical property. This has led to increased investment in the real estate market and made it easier for investors to access the market.
In conclusion, the Saudi Arabian government has implemented several initiatives and regulations to promote the real estate market in the country. These initiatives and regulations are expected to impact the market in the long term positively, and investors are encouraged to take advantage of the available opportunities.
Market Research and Reports
CBRE and Other Market Research
Several market research and report providers exist in the Saudi Arabian real estate market, including CBRE. CBRE is a global real estate services and investment firm that provides market research and analysis. They have a strong presence in the Saudi Arabian market and provide valuable insights into real estate trends.
CBRE’s market research reports cover various real estate market segments, including office, retail, residential, and industrial. These reports provide data on market trends, supply and demand, rental rates, and investment opportunities. CBRE’s reliable and trustworthy research makes it a valuable source for real estate investors and professionals.
Other market research providers include JLL, Colliers International, and Knight Frank. These firms provide services similar to CBRE and have a strong presence in the Saudi Arabian real estate market. Their reports cover various market segments, providing valuable insights for real estate professionals.
Availability of Reports and Data Download
Most market research reports are available for download on the respective company websites. CBRE, JLL, Colliers International, and Knight Frank have online portals where users can access the latest market research reports. These reports are available for download in various formats, including PDF and Excel.
Besides market research reports, other data sources are available for download. The Saudi Arabia General Authority for Statistics (SAGIA) provides data on various economic indicators, including real estate. This data is available for download on their website and can be used to supplement market research reports.
Overall, market research reports and data download availability are excellent in the Saudi Arabian real estate market. Investors and professionals can access reliable and trustworthy information to make informed decisions.
Frequently Asked Questions
How does Ramadan affect the real estate market activity in Saudi Arabia?
Ramadan is a month of fasting, prayer, and reflection for Muslims worldwide, including Saudi Arabia. During this time, the real estate market in Saudi Arabia typically experiences a slowdown in activity due to reduced working hours and the focus on religious observances. However, some experts suggest that the market may experience a surge in activity towards the end of Ramadan as families look to purchase or rent properties before the Eid al-Fitr holiday.
What are the expected real estate price trends during Ramadan in Saudi Arabia?
The real estate market in Saudi Arabia is known for its stability, and this is reflected in the prices of properties during Ramadan. While there may be some price fluctuations due to the reduced activity, the prices are expected to remain steady.
Does consumer behavior in purchasing property change during Ramadan in Saudi Arabia?
Consumer behavior in purchasing property may change during Ramadan in Saudi Arabia due to the reduced working hours and the focus on religious observances. Families may be more inclined to purchase or rent properties closer to their places of worship. They may also be more likely to consider properties that offer amenities such as prayer rooms or easy access to mosques.
Are specific regulations affecting Saudi Arabia’s real estate transactions during Ramadan?
No specific regulations affect Saudi Arabia’s real estate transactions during Ramadan. However, it is important to note that the reduced working hours and focus on religious observances may lead to delays in the processing of transactions.
What are the peak hours for real estate viewings in Saudi Arabia during Ramadan?
The peak hours for real estate viewings in Saudi Arabia during Ramadan may vary depending on the location and the preferences of the buyers or renters. However, it is generally recommended to schedule viewings during the early morning or late afternoon to avoid the day’s heat and allow time to break the fast.
How do real estate marketing strategies in Saudi Arabia shift during Ramadan?
Real estate marketing strategies in Saudi Arabia may shift during Ramadan to focus on the religious and cultural significance of the month. Marketing materials may include messages of peace, reflection, and community and highlight properties that offer amenities such as prayer rooms or easy access to mosques. Additionally, marketing efforts may target families looking to purchase or rent properties before the Eid al-Fitr holiday.
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