عربي English Türkçe اردو فارسى
Logo
Latest News
Business

Interest Rate Cut Boosts Saudi Real Estate Activity

A general view of Riyadh, Saudi Arabia. (SPA)
A general view of Riyadh, Saudi Arabia. (SPA)
TT
TT

Interest Rate Cut Boosts Saudi Real Estate Activity

A general view of Riyadh, Saudi Arabia. (SPA)
A general view of Riyadh, Saudi Arabia. (SPA)

Experts expect the recent 50-basis-point interest rate cut by the Saudi Central Bank (SAMA) to boost the Kingdom’s real estate market.

The move is likely to direct more investor funds into property, enhance liquidity for developers, and speed up the construction of new projects.

Experts foresee a new market dynamic that could drive property prices up and sustain growth for the next six years, with demand for real estate expected to peak in the coming months.

Ahmad Al-Faqih, a real estate expert, told Asharq Al-Awsat that the rate cut will trigger a wave of delayed buying from those who postponed purchases during recent price increases. He anticipated a significant rise in demand over the next six months.

Al-Faqih also noted that recent months have seen demand outpacing supply, partly due to new buyers entering the market after changes allowing non-Saudis to own property. This trend is expected to particularly affect major cities like Riyadh.

The interest rate reduction will create strong demand for residential units, combining with buyers who delayed purchases in previous years, he stressed. This shift could reshape the market and lead to rising property prices.

Additionally, Al-Faqih noted that the changes will encourage developers to build new residential projects and attract non-Saudi investors, increasing supply but not enough to match high demand.

Lower financing costs will further motivate investment in the real estate sector.

Real estate expert Saqr Al-Zahrani told Asharq Al-Awsat that Saudi Arabia’s recent interest rate cut is also expected to boost homeownership.

With borrowing costs lower, more individuals are likely to buy homes, especially in growing areas like Riyadh and Jeddah. However, challenges in finding suitable housing for middle- and low-income groups may limit the benefits.

Al-Zahrani noted that the impact on commercial real estate might be slower to materialize due to broader economic factors. Yet, increased foreign investment and interest in projects like NEOM and Qiddiya could boost opportunities in the sector.

The rate cut will positively affect property developers by improving liquidity, allowing them to take on new projects and speed up construction, while also helping them manage rising material costs, he remarked.

Regarding property prices, Al-Zahrani cautioned that it’s hard to predict the exact effects of the rate cut. While lower borrowing costs may boost demand and drive prices up, other factors like regulations and development costs could limit this increase.

Al-Zahrani expected residential prices to rise faster than commercial prices, though not in direct correlation with the interest rate change.

Most Viewed

 
 
Business

US Economy Grew at Solid 3% Rate Last Quarter, Government Says in Final Estimate

FILE - The New York Stock Exchange, at rear, is shown on Sept. 24, 2024, in New York. (AP Photo/Peter Morgan, File)
FILE - The New York Stock Exchange, at rear, is shown on Sept. 24, 2024, in New York. (AP Photo/Peter Morgan, File)
TT
TT

US Economy Grew at Solid 3% Rate Last Quarter, Government Says in Final Estimate

FILE - The New York Stock Exchange, at rear, is shown on Sept. 24, 2024, in New York. (AP Photo/Peter Morgan, File)
FILE - The New York Stock Exchange, at rear, is shown on Sept. 24, 2024, in New York. (AP Photo/Peter Morgan, File)

The American economy expanded at a healthy 3% annual pace from April through June, boosted by strong consumer spending and business investment, the government said Thursday, leaving its previous estimate unchanged.
The Commerce Department reported that the nation's gross domestic product — the nation's total output of goods and services — picked up sharply in the second quarter from the tepid 1.6% annual rate in the first three months of the year, The Associated Press reported.
Consumer spending, the primary driver of the economy, grew last quarter at a 2.8% pace, down slightly from the 2.9% rate the government had previously estimated. Business investment was also solid: It increased at a vigorous 8.3% annual pace last quarter, led by a 9.8% rise in investment in equipment.
The final GDP estimate for the April-June quarter included figures showing that inflation continues to ease, to just above the Federal Reserve’s 2% target. The central bank’s favored inflation gauge — the personal consumption expenditures index, or PCE — rose at a 2.5% annual rate last quarter, down from 3% in the first quarter of the year. Excluding volatile food and energy prices, so-called core PCE inflation grew at a 2.8% pace, down from 3.7% from January through March.
The US economy, the world's biggest, displayed remarkable resilience in the face of the 11 interest rate hikes the Fed carried out in 2022 and 2023 to fight the worst bout of inflation in four decades. Since peaking at 9.1% in mid-2022, annual inflation as measured by the consumer price index has tumbled to 2.5%.
Despite the surge in borrowing rates, the economy kept growing and employers kept hiring. Still, the job market has shown signs of weakness in recent months. From June through August, America's employers added an average of just 116,000 jobs a month, the lowest three-month average since mid-2020, when the COVID pandemic had paralyzed the economy. The unemployment rate has ticked up from a half-century low 3.4% last year to 4.2%, still relatively low.
Last week, responding to the steady drop in inflation and growing evidence of a more sluggish job market, the Fed cut its benchmark interest rate by an unusually large half-point. The rate cut, the Fed’s first in more than four years, reflected its new focus on shoring up the job market now that inflation has largely been tamed.
Some other barometers of the economy still look healthy. Americans last month increased their spending at retailers, for example, suggesting that consumers are still able and willing to spend more despite the cumulative impact of three years of excess inflation and high borrowing rates. The nation’s industrial production rebounded. The pace of single-family-home construction rose sharply from the pace a year earlier.
And this month, consumer sentiment rose for a third straight month, according to preliminary figures from the University of Michigan. The brighter outlook was driven by “more favorable prices as perceived by consumers” for cars, appliances, furniture and other long-lasting goods.
A category within GDP that measures the economy’s underlying strength rose at a healthy 2.7% annual rate, though that was down from 2.9% in the first quarter. This category includes consumer spending and private investment but excludes volatile items like exports, inventories and government spending.
Though the Fed now believes inflation is largely defeated, many Americans remain upset with still-high prices for groceries, gas, rent and other necessities. Former President Donald Trump blames the Biden-Harris administration for sparking an inflationary surge. Vice President Kamala Harris, in turn, has charged that Trump’s promise to slap tariffs on all imports would raise prices for consumers even further.
On Thursday, the Commerce Department also issued revisions to previous GDP estimates. From 2018 through 2023, growth was mostly higher — an average annual rate of 2.3%, up from a previously reported 2.1% — largely because of upward revisions to consumer spending. The revisions showed that GDP grew 2.9% last year, up from the 2.5% previously reported.
Thursday’s report was the government’s third and final estimate of GDP growth for the April-June quarter. It will release its initial estimate of July-September GDP growth on Oct. 30.