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Real Estate Price Index Stabilizes in Saudi Arabia

Saudi Arabia saw a slight increase in the real estate price index during Q2 (Asharq Al-Awsat)
Saudi Arabia saw a slight increase in the real estate price index during Q2 (Asharq Al-Awsat)
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Real Estate Price Index Stabilizes in Saudi Arabia

Saudi Arabia saw a slight increase in the real estate price index during Q2 (Asharq Al-Awsat)
Saudi Arabia saw a slight increase in the real estate price index during Q2 (Asharq Al-Awsat)

Saudi real estate prices stabilized in the second quarter of this year compared to the first three months, while the real estate price index increased by 0.8% in the second quarter of 2023.

The General Authority for Statistics (GASTAT) issued a report on Tuesday attributing the annual increase in the index to residential property prices rising by 1.1 percent and commercial by 0.2 percent in the second quarter compared to last year.

The increase in the real estate prices in the residential sector is attributed to the rise in the prices of residential plots (1.2 percent) on an annual basis in Q2 of 2023.

The report also showed a 1.0 percent increase in the prices of apartments, a 0.9 percent decrease in the prices of buildings, a 5.0 percent drop in the prices of villas, and a 0.1 percent decline in the prices of houses.

According to the report, real estate prices in the commercial sector increased by 0.2 percent, affected by the increase in the prices of commercial plots of land (0.2 percent).

The prices of spaces for commercial exhibitions decreased by 1.1 percent, and the costs of commercial buildings and commercial centers stabilized in Q2 of 2023.

On a quarterly basis, commercial sector prices decreased by 0.1 percent, driven by the fall in land prices of 0.1 percent and exhibitions by 0.6 percent.

Among other residential real estate, the prices of apartments increased by 0.1 percent, while the prices of villas decreased by 1.7 percent and residential houses by 0.3 percent.

The report added that the prices of residential buildings were stable in the second quarter of 2023.

The GASTAT report further pointed out that real estate prices stabilized in the second quarter of this year compared to the first three months.

Compared to the first quarter, commercial sector prices decreased by 0.1 percent, driven by the fall in land prices by 0.1 percent and exhibitions by 0.6 percent.

The report revealed that prices of commercial buildings and centers were also stable in the second quarter of 2023.

The report showed a 0.3 percent decrease in the agricultural sector, attributed to the 0.3 percent decrease in agricultural land prices.

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S&P Expects Saudi Issuances to Continue Domestically, Internationally Driven by Vision 2030

A view of the Saudi capital, Riyadh. (SPA)
A view of the Saudi capital, Riyadh. (SPA)
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S&P Expects Saudi Issuances to Continue Domestically, Internationally Driven by Vision 2030

A view of the Saudi capital, Riyadh. (SPA)
A view of the Saudi capital, Riyadh. (SPA)

S&P Global Ratings anticipates that Saudi issuers will continue to tap local and international capital markets to finance projects under Saudi Arabia’s Vision 2030. The agency expects debt levels to remain manageable, with private sector debt-to-GDP ratios staying below 100% over the next 12 to 24 months.

According to S&P’s report, “Saudi Capital Market Overview: Rising Issuance Levels Are Just the Start”, Saudi companies have dominated issuance activity in recent years. Over the past five years, Saudi entities, including government-related entities, have accounted for roughly two-thirds of non-governmental US dollar-denominated issuances. However, the report predicted that banks will play an increasingly significant role in the future.

The report noted that Saudi issuers have raised over $130 billion in US dollar-denominated issuances over the last five years. This adds to $144 billion raised domestically in Saudi riyals during the same period, driven by Vision 2030 initiatives.

While the government accounts for about 60% of these issuances, the Kingdom’s Vision 2030 has created expansive opportunities in the non-oil economy and banking system, paving the way for future growth, the report underlined.

S&P highlighted the development of Saudi Arabia’s mortgage-backed securities market as a key factor to watch over the next two years. As of the end of September 2024, Saudi banks held more than $175 billion in mortgage financing, most of which carried fixed interest rates but were funded through short-term resources, primarily local deposits.

With declining interest rates, some of these mortgages could re-enter circulation, enabling banks to sell them in the secondary market without incurring losses. This would allow banks to offload mortgage financing from their balance sheets, provided legal challenges surrounding the mortgage-backed securities issuance are resolved or mitigated sufficiently to attract local and international investor interest.

According to the report, developing the mortgage-backed securities market could significantly enhance banks’ financial capacity, enabling them to better support the implementation of Vision 2030. This could occur through existing infrastructure, such as the Saudi Real Estate Refinance Company, or via direct issuances in the capital markets.