The Saudi real estate market is expected to reach more than $94 billion by 2028 (Shutterstock)
As part of Saudi Arabia's efforts to attract foreign direct investment and enhance the role of the real estate sector in the local economy, the Saudi Capital Market Authority announced its intention to allow non-Saudis to invest for the first time in listed companies that own real estate in Mecca and Medina.
This decision comes within the framework of Saudi Arabia’s strategy to promote foreign investments and diversify sources of income, and reflects the Kingdom’s Vision 2030, which aims to achieve comprehensive development and develop new sectors in the Saudi economy.
The Chairman of the Authority’s Board of Directors, Muhammad Al-Quwaiz, spoke about the importance of this step in diversifying financing products in the financial market during the current year, with a focus on developing the debt market, real estate contributions, and improving the funds sector.
Al-Quwaiz pointed to the increasing role of the financial market in facilitating financing for the real estate sector outside the framework of traditional financing sectors, with the aim of building a sustainable and prosperous real estate future.
The importance of the real estate sector
The real estate sector is one of the most important sectors that contribute to achieving this vision, given the rapid growth and prosperity it has witnessed in recent years.
Saudi Arabia represents an important destination for real estate investors from all over the world, especially in the cities of Mecca and Medina, which are of great importance in the Islamic world.
According to experts, the decision aims to strengthen Saudi Arabia’s position as an attractive investment destination, allowing foreign investors to invest in the real estate sector, especially in Mecca and Medina.
This decision also aims to increase the domestic product, provide job opportunities, and stimulate economic development in the real estate sector by providing new financing to real estate companies, while opening investment options for foreign investors in listed real estate companies.
The decision is expected to achieve positive returns for the real estate sector in Saudi Arabia, especially in the cities of Mecca and Medina, and among these returns is an increase in demand for real estate in the two holy cities, and enhancing investment in new real estate projects by providing new sources of financing for companies, in addition to improving real estate services in the two cities. .
Al-Assaf expects real estate investment to contribute to enhancing economic mobility in the Kingdom (Al-Jazeera)
Promoting economic mobility
Regarding the Kingdom’s decision to allow non-Saudis to invest in the real estate sector in Mecca and Medina, Saudi economist Suleiman Al-Assaf expected that this decision would have an important and positive impact, especially after the real estate sector in Mecca and Medina was exposed to a strong shock as a result of the decline in the movement of pilgrims and pilgrims due to the Corona pandemic.
Al-Assaf confirms - in an interview with Al Jazeera Net - that the decision is an important step that reflects the Kingdom’s desire to strengthen its position as an attractive investment destination. It also provides new investment opportunities for foreign investors and enhances economic development in the real estate sector in general.
He added, “It is expected that interest in real estate in Mecca and Medina will increase and demand for it will increase significantly in the coming period, due to factors, including: the Kingdom’s endeavor to double the number of Umrah pilgrims and pilgrims in the coming years, in addition to economic growth, which is expected to reach 7% in 2024.” “As well as the economic reforms implemented by the Saudi government, which support investment in the real estate sector.”
Al-Assaf points out that increasing demand for housing and facilities in the two holy cities would enhance economic mobility and contribute to supporting real estate services and developing infrastructure in Mecca and Medina.
According to the Saudi economist, the Saudi real estate market is expected to grow from 250 billion Saudi riyals ($67.7 billion) in 2023 to 353 billion riyals ($94.19 billion) by 2028, with a compound annual growth rate of approximately 8% during the period between 2023 and 2028, indicating that it is hoped that this number will increase significantly with regard to the housing sector in Mecca and Medina, which reflects the importance of the sector and its growth expectations.
Investment opportunities
For his part, Saudi economic analyst Mohammed bin Abdullah Al-Rasheed confirms that the decision represents an important step to strengthen the local economy and foreign investment flows to the Kingdom, especially since Mecca and Medina enjoy an exceptional status in the Islamic world and are two major destinations for pilgrims and Umrah performers.
By opening the door to foreign investments in the real estate sector in these holy cities, distinguished investment opportunities will be provided to non-Saudi investors, the same spokesman adds.
Al-Rasheed expects - in an interview with Al Jazeera Net - that this decision will have a significant positive impact on the real estate sector in Mecca and Medina, as it will contribute to developing infrastructure and developing modern and advanced real estate projects, in addition to providing new job opportunities and promoting economic growth and sustainable development in the two cities.
Al-Quwaiz revealed that the Saudi Capital Market Authority allows non-Saudis to invest in listed companies that own real estate in Mecca and Medina (social media)
He points out that the decision will increase the demand for residential real estate in Medina, especially in areas close to the Prophet’s Mosque. It is also expected that the decision will contribute to enhancing investment in new real estate projects in Medina, such as residential, commercial and hotel projects.
From an economic standpoint, the Saudi economic analyst believes that foreign investments in the real estate sector are expected to achieve good returns for investors, noting that thanks to the high demand for real estate in Mecca and Medina, distinguished financial returns can be achieved in the long term.
Figures about the real estate market in Saudi Arabia
The Saudi real estate market is divided into 3 main sectors, which include:
The residential sector (houses, villas, and apartments), representing about 60% of the market size.
The commercial sector (offices, shops, and malls) constitutes about 20% of the market.
The industrial sector (factories and warehouses), also constitutes 20%.
According to the Saudi Statistics Authority’s report for the year 2023:
The number of workers in the real estate sector reached about 1.5 million, representing 6% of the total employment in the Kingdom
The number of companies operating in the sector increased by 10% to reach about 250,000 companies, representing 10% of the total companies in the Kingdom.
The number of real estate companies listed on the financial market reached about 100 companies, representing 3% of the total listed companies.
Source: Al Jazeera