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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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US Treasury Targets Russia's Gazprombank with New Sanctions

FILE PHOTO: A bronze seal for the Department of the Treasury is shown at the US Treasury building in Washington, US, January 20, 2023. REUTERS/Kevin Lamarque/File Photo
FILE PHOTO: A bronze seal for the Department of the Treasury is shown at the US Treasury building in Washington, US, January 20, 2023. REUTERS/Kevin Lamarque/File Photo
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US Treasury Targets Russia's Gazprombank with New Sanctions

FILE PHOTO: A bronze seal for the Department of the Treasury is shown at the US Treasury building in Washington, US, January 20, 2023. REUTERS/Kevin Lamarque/File Photo
FILE PHOTO: A bronze seal for the Department of the Treasury is shown at the US Treasury building in Washington, US, January 20, 2023. REUTERS/Kevin Lamarque/File Photo

The United States imposed new sanctions on Russia's Gazprombank on Thursday, the Treasury Department said, as President Joe Biden steps up actions to punish Moscow for its invasion of Ukraine before he leaves office in January.
The move, which wields the department's most powerful sanctions tool, effectively kicks Gazprombank out of the US banking system, bans its trade with Americans and freezes its US assets, Reuters reported.
Gazprombank is one of Russia's largest banks and is partially owned by Kremlin-owned gas company Gazprom. Since Russia's invasion in February 2022, Ukraine has been urging the US to impose more sanctions on the bank, which receives payments for natural gas from Gazprom's customers in Europe.
The fresh sanctions come days after the Biden administration allowed Kyiv to use US ATACMS missiles to strike Russian territory. On Tuesday, Ukraine fired the weapons, the longest range missiles Washington has supplied for such attacks on Russia, on the war's 1,000th day.
The Treasury also imposed sanctions on 50 small-to-medium Russian banks to curtail the country's connections to the international financial system and prevent it from abusing it to pay for technology and equipment needed for the war. It warned that foreign financial institutions that maintain correspondent relationships with the targeted banks "entails significant sanctions risk."
"This sweeping action will make it harder for the Kremlin to evade US sanctions and fund and equip its military," Treasury Secretary Janet Yellen said. "We will continue to take decisive steps against any financial channels Russia uses to support its illegal and unprovoked war in Ukraine."
Gazprombank said Washington's latest move would not affect its operations. The Russian embassy in Washington did not respond to requests for comment.
Along with the sanctions, Treasury also issued two new general licenses authorizing US entities to wind down transactions involving Gazprombank, among other financial institutions, and to take steps to divest from debt or equity issued by Gazprombank.
Gazprombank is a conduit for Russia to purchase military materiel in its war against Ukraine, the Treasury said. The Russian government also uses the bank to pay its soldiers, including for combat bonuses, and to compensate the families of its soldiers killed in the war.
The administration believes the new sanctions improve Ukraine's position on the battlefield and ability to achieve a just peace, a source familiar with the matter said.
COLLATERAL IMPACT
While Gazprombank has been on the administration's radar for years, it has been seen as a last resort because of its focus on energy and the desire to avoid collateral impact on Europe, a Washington-based trade lawyer said.
"I think that the current administration is trying to put as much pressure and add as many sanctions as possible prior to January 20th to make it harder for the next administration to unwind," said the lawyer, Douglas Jacobson.
Officials in Slovakia and Hungary said they were studying the impacts of the new US sanctions.
Trump would have the power to remove the sanctions, which were imposed under an executive order by Biden, if he wants to take a different stance, Jacobson said.
After Russia's invasion in 2022, the Treasury placed debt and equity restrictions on 13 Russian firms, including Gazprombank, Sberbank and the Russian Agricultural Bank.
The US Treasury has also worked to provide Ukraine with funds from windfall proceeds of frozen Russian assets.