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4 Factors behind the Stability of Real Estate Prices in Saudi Arabia

The decline in demand reflected negatively on real estate developers.
The decline in demand reflected negatively on real estate developers.
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4 Factors behind the Stability of Real Estate Prices in Saudi Arabia

The decline in demand reflected negatively on real estate developers.
The decline in demand reflected negatively on real estate developers.

Real estate is one of the vital sectors that have a strategic impact on the Saudi economy. With its major transformation and its new incentives aimed at attracting nationals and foreigners, the sector’s contribution to the GDP increased significantly to reach 12.8 percent in the first quarter of 2023, according to figures published by the Real Estate Authority.

Despite the successive rise in US interest rates, which reached record levels in 22 years, the real estate price index in Saudi Arabia slightly increased in the second quarter, not exceeding 0.8 percent on an annual basis.

In comments to Asharq Al-Awsat, real estate expert Eng. Ahmed Al-Fageeh attributed the stability of the real estate market to four factors: the record and continuous rise in interest rates, the decrease in the number of real estate deals, the drop of housing finance contracts, and the amendment of housing support for citizens, which is one of the most important solutions provided by the Ministry of Housing in order to provide assistance to beneficiaries.

As of the second quarter of 2023, the sales of villas and apartments started to rise again, Al-Fageeh noted, saying that the value of villa sales in the last three months of May, June and July increased by 22 percent, reaching SAR 6.6 billion compared to SAR 5.4 billion in 2022.

He explained that these figures indicated that the real estate market overcame the impact of high interests and other factors, and highlighted the existence of independent purchasing power in the real estate market.

Regarding appropriate solutions to reduce the cost of residential real estate for citizens, Al-Fageeh underlined the need to provide real estate developers with residential plots and lands, as well as financing, in partnership with the Ministry of Housing and based on a specific national program, thus helping bring in a large number of housing units into the real estate market and raising the supply.

Consultant and real estate expert Al-Aboudi bin Abdullah told Asharq Al-Awsat that the record increase in interest rates over the last period caused a general stagnation in real estate prices.

He added that the latest report by the General Authority for Statistics on the consumer price index during June 2023 showed an increase in the monthly inflation index for real estate prices by 0.8 percent, which is relatively low, unlike the results of previous quarters, which reached 20 percent.

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Saudi Arabia's Digital Advertising Boom: Addressing Economic Leakage, Boosting Local Content

A digital advertising event recently held in Riyadh (Asharq Al-Awsat)
A digital advertising event recently held in Riyadh (Asharq Al-Awsat)
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Saudi Arabia's Digital Advertising Boom: Addressing Economic Leakage, Boosting Local Content

A digital advertising event recently held in Riyadh (Asharq Al-Awsat)
A digital advertising event recently held in Riyadh (Asharq Al-Awsat)

Saudi Arabia’s digital advertising sector is experiencing rapid growth, but a significant portion of its revenues is leaking to foreign platforms. To maximize the impact on the national economy, experts are calling for strategies to curb this outflow and redirect it to local channels.

The importance of retaining digital ad revenues lies in the substantial size of this market. It is estimated that approximately $1 billion in ad spent is lost annually to foreign platforms, representing a considerable loss to Saudi Arabia’s economy.

Dr. Ebada Al-Abbad, CEO of Marketing and Communications at Tadafuq, a Saudi digital advertising network, told Asharq Al-Awsat that the problem stems from the fact that although advertisers, products, and audiences are often local, the largest share of financial gains goes to foreign platforms. He estimated that 70-80% of the $1.5 billion spent on digital advertising in Saudi Arabia in 2022 went to global platforms such as Google and Facebook. This results in the national economy losing nearly $1 billion annually from this sector alone.

Al-Abbad noted that government agencies in Saudi Arabia also contribute to the outflow. He explained that public sector spending on digital advertising, intended to raise awareness among citizens and residents, frequently ends up on foreign platforms. Government spending makes up about 20-25% of the total digital ad market in the Kingdom, meaning hundreds of millions of riyals leave the country annually, weakening the local digital economy.

Al-Abbad argues that Saudi Arabia needs strong local digital ad networks to keep this revenue within the national economy. These networks would help create jobs, drive innovation, and promote cultural diversity in digital content. Developing local platforms would also enhance Saudi Arabia’s digital sovereignty by ensuring that data remains within the country and is not controlled by foreign entities.

Moreover, local networks would reduce dependence on international platforms, ensuring that the economic benefits of digital advertising remain in the Kingdom, he said, stressing that this would align with Saudi Arabia’s broader Vision 2030 goals, which emphasize building a robust, diversified economy driven by local industries and digital transformation.

Globally, the digital advertising sector is growing rapidly. In 2022, worldwide spending on digital ads reached $602 billion, and it is projected to hit $876 billion by 2026. In the Middle East and North Africa (MENA) region, the digital ad market grew to $5.9 billion in 2022, with Saudi Arabia’s market accounting for over $1.5 billion.

In other countries, the digital ad sector plays a crucial role in boosting national economies. For example, in the United States, the digital advertising industry contributed $460 billion to the GDP in 2021, about 2.1% of the total. In the UK, the sector accounted for 1.8% of GDP in 2022. This shows how important digital advertising can be in driving economic growth.

One of the key challenges facing Saudi Arabia’s digital ad sector is the dominance of global platforms like Google and Facebook, which control 60% of the global digital ad market, Al-Abbad told Asharq Al-Awsat. This dominance results in a significant outflow of revenue and allows these platforms to control digital data and content. He warned that this could undermine Saudi Arabia’s national sovereignty over its digital economy.

To counter this, he emphasized that Saudi Arabia needs to build competitive local networks that can retain a larger share of the market. This will not only keep more revenue in the country but also strengthen the Kingdom’s control over its digital data and content.