High Demand, Lower Interest Rates Boost Growth in Saudi Arabia’s Real Estate Transactions

Riyadh accounts for about 60% of total real estate deals (Reuters)
Riyadh accounts for about 60% of total real estate deals (Reuters)
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High Demand, Lower Interest Rates Boost Growth in Saudi Arabia’s Real Estate Transactions

Riyadh accounts for about 60% of total real estate deals (Reuters)
Riyadh accounts for about 60% of total real estate deals (Reuters)

High demand for residential units in Saudi Arabia’s major cities, along with a recovery in the real estate market driven by lower interest rates, has boosted the total value of real estate transactions in the Kingdom to $50 billion (SAR 188 billion) during the first nine months of 2024. This marks a 35% increase compared to the same period last year, according to real estate experts who expect this growth to continue in the next quarter and in the coming years.

Data from the Saudi Ministry of Justice revealed that over 162,000 real estate transactions were recorded during this period, with the residential sector accounting for about 86% of the total. The commercial sector made up around 10% of the transactions. The Riyadh region led the way with approximately 60% of the total transactions, valued at $27 billion (SAR 101 billion), followed by the Makkah region with 19%, valued at $11.8 billion (SAR 44.3 billion).

Investor Confidence

In remarks to Asharq Al-Awsat, real estate expert and appraiser Eng. Ahmed Al-Faqih highlighted that the growth in real estate transactions reflects the strong confidence of investors and stakeholders in the resilience and attractiveness of the Saudi real estate market. He noted that this was particularly evident in Riyadh, which accounted for half of the total real estate activity over the past nine months, driven by the government’s launch of several large-scale projects in the capital.

Al-Faqih added that the real estate market’s growth is aligned with the broader investment activity in the country. This growth is supported by increased regulations, governance, and transparency, which have propelled Saudi Arabia to rank 12th globally in the Real Estate Transparency Index, placing it among the top 40 international markets in terms of transparency.

A report from global real estate consultancy Knight Frank noted that the total value of Saudi Arabia’s Vision 2030 projects launched in the past eight years has reached $1.3 trillion.

Supply and Demand

For his part, real estate expert Saqr Al-Zahrani told Asharq Al-Awsat that supply and demand are the primary drivers of the real estate market in Saudi Arabia. He anticipates that a gradual reduction in interest rates will stimulate real estate demand in the fourth quarter of 2024 by lowering financing costs, encouraging both investors and buyers to capitalize on the opportunity.

Al-Zahrani attributed the growth in real estate transactions in Riyadh to its position as a key destination for internal migration and investment opportunities, driven by infrastructure projects and a growing population, which continue to boost demand for both residential and commercial properties in Riyadh and nearby areas.

He also highlighted that regional conflicts and Saudi Arabia’s stable strategic position have increased the Kingdom’s appeal in the real estate market.

Looking ahead to the fourth quarter of 2024, Al-Zahrani expects continued growth in real estate transactions due to three key factors: the seasonal rise in demand in Makkah during Umrah and Hajj, the increase in residential and commercial projects in Riyadh alongside significant infrastructure investments, and the easing of financing restrictions with lower interest rates.

Al-Zahrani identified six factors that will drive long-term growth in Saudi Arabia’s real estate market: large infrastructure projects improving the quality of life, growing demand for housing due to population growth and internal migration, regulatory reforms facilitating property ownership and investment, increased foreign investment driven by political stability, diverse financing options such as investment funds and crowdfunding platforms, and Saudi Arabia’s stable political climate compared to neighboring countries, boosting investor confidence.



Japan's Core Inflation Rate Slows in September

FILE PHOTO: Media members observe the stock quotation board at the Tokyo Stock Exchange in Tokyo, Japan, August 6, 2024. REUTERS/Willy Kurniawan/File Photo
FILE PHOTO: Media members observe the stock quotation board at the Tokyo Stock Exchange in Tokyo, Japan, August 6, 2024. REUTERS/Willy Kurniawan/File Photo
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Japan's Core Inflation Rate Slows in September

FILE PHOTO: Media members observe the stock quotation board at the Tokyo Stock Exchange in Tokyo, Japan, August 6, 2024. REUTERS/Willy Kurniawan/File Photo
FILE PHOTO: Media members observe the stock quotation board at the Tokyo Stock Exchange in Tokyo, Japan, August 6, 2024. REUTERS/Willy Kurniawan/File Photo

Japanese inflation slowed in September with prices up 2.4 percent on-year, not including volatile fresh food, official data showed Friday.
The core Consumer Price Index eased from 2.8 percent in August as the pace of increase in electricity and gas prices relented, the internal affairs ministry said.
Despite the slowdown, the rate remained above the Bank of Japan's two percent target, set over a decade ago as part of efforts to boost the stagnant economy, reported AFP.
The target has been surpassed every month since April 2022, although the bank has questioned to what extent that is down to temporary factors such as the Ukraine war.
"The resumption of electricity subsidies resulted in a plunge in headline inflation in September," said Marcel Thieliant, head of Asia-Pacific at Capital Economics.
Thieliant predicted a further deceleration of core inflation in October, but noted that the subsidies "should be phased out completely by December, which should lift inflation".
The Bank of Japan raised interest rates in March for the first time since 2007 and again in July, in initial steps towards normalizing its ultra-loose monetary policies.
New Prime Minister Shigeru Ishiba said this month that the environment was not right for another interest rate increase.
After Ishiba took office in early October, perceptions that he favored hiking borrowing costs and the possibility that he could raise taxes triggered a surge in the yen and stock market volatility.
One dollar bought 150 yen on Friday morning after the Japanese currency weakened from levels around 149.35 the day before.
Excluding both fresh food and energy, Japanese prices rose 2.1 percent in September.
"We expect inflation excluding fresh food and energy to remain around two percent until early next year, when it should gradually fall below two percent," Thieliant said.
"Accordingly, we still expect the Bank of Japan to press ahead with another interest rate hike before year-end."