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Interest Rate Cut Boosts Saudi Real Estate Activity

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

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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.