The pandemic impact on real estate prices was big. Long periods of little to no activity combined with the effects of the pandemic on the economy. All of that had a big impact and it has reshaped the housing market in many ways. But Saudi Arabia is on a good path to recovering from the pandemic impact on the housing market. And not only recovering but prospering. This is in part thanks to the fact that the kingdom has liberalized investment guidelines. And due to that, there are new business sectors open for investors. Because of this, many companies are looking to expand their business in the country. If you are looking to expand your business to the kingdom of Saudi Arabia make sure that you hire one of the best shipping and logistics companies that can aid you with your expansion.
The economic recovery and its impact on real estate prices
The Kingdom real estate market, especially the residential one has remained relatively stable. And now due to the economy somewhat stabilizing itself and recovering to its pre-pandemic levels, so are real estate prices. This is in part due to the constant and strong demand for real estate. Also because of a multitude of different factors. And the effort that is being put into boosting the economy with tax relaxations. Of which there is very likely to be more in the near future for homeowners and business owners. Here are some factors that affected real estate prices and the economy.
Last year the Saudi Government removed the 15% VAT tax on all property transactions. And they also lowered property taxes. Now instead there is the 5% tax on transactions. This has helped a lot with the pandemic impact on real estate prices. Due to that, residential prices in Riyadh have had an annual increase of two percent last year. Both for apartments and villas. And there are now many real estate opportunities in Riyadh. Also, the threshold for tax exemption for first-time homebuyers has been increased from 850,000 SAR to 1 million SAR. All of this is part of Saudi Arabia’s National Transformation Program 2030. That aims for 70% of the households to be owned by 2030. And in Q1 2020 homeownership has reached 63% bringing it very close to the goal.
Growing mortgage market
This year Saudi mortgages jumped by a third compared to last year. One of the things driving the stability of Kingdoms property market is its structured mortgage market. Last year, the Kingdom central bank, The Saudi Arabian Monetary Agency (SAMA), has cut its repo rate by 50 basis points and then by another 75 basis points to 1%. And the reverse repo rate was also cut from 1.25% to 0.5%. All of that helped the mortgage market to maintain its strong growth. Around 80% of the mortgages that were issued in the kingdom are for villas. While 15% were apartments and 5% went to residential lots. If you are one of the people buying real estate. Whether it’s for commercial or private use, make sure you hire one of the best logistics companies in Saudi Arabia. The mortgage market is now around 15% of the GDP.
House price changes during the pandemic and residential investing
In recent years Saudis have been investing more money into real estate. And have started encouraging foreign investment. Since 2000 foreigners were allowed to buy a property and own a private residence. Anywhere but in Mecca and Medina. But only with a license obtained from the Ministry of Interior. There are more things to have in mind when purchasing a house overseas. They can also use their property for running a business but that also requires permission from the Ministry of Interior. Ever since they have been implemented they have increased the prices of houses. While the pandemic impact on real estate prices was noticeable in some places more than others. Riyadh has had the biggest residential property price increase during the pandemic. At the same time:
- Najran prices increased by 0.75%
- Qassim prices went up by 3.13%
- Al Baha prices rose by 4.18%
- Al Jouf prices dropped by 2.23%
- Asir prices fell by 0.19%
While the pandemic impact on real estate prices was tough, big real estate developments will make a huge difference
With the Kingdom preparing many new real estate projects to be built as part of its Vision 2030. Some of those huge projects being: NEOM, Qiddiya, Amaala, and the Red Sea Project. These four are often called the most ambitious projects in the world. And the private investment is a big part of realizing Vision 2030. There is a huge potential for private enterprises to invest and participate in many ways. Consequently, some of the huge projects are going to have a big impact on the housing market. Which is estimated to reach $280 billion from 2020 to 2030. While the pandemic impact on real estate prices was tough in some places. Saudi Arabia’s real estate market is recovering well. And with these projects, it is on a great path to prospering. The most important for the housing market being NEOM.
NEOM is an acronym that means “New Future”. It is planned to be a cross-border city in Tabuk province. It is located south of Israel and Jordan, north of the Red Sea, and east of Egypt. NEOM is meant to utilize smart city technologies and also function as a tourist destination. And the estimated cost for it is $500 billion. It will cover an area of 26,500 square kilometers and has a focus on sustainability and livability. The project is going to be 100% powered by renewable energy sources. And for nature to always be a short walk away. One big and impressive part of NEOM is The Line. It is a linear city planned to be 170 km long. And it is supposed to house 1 million citizens without conventional cars. There is no doubt that it is going to have a huge impact on the housing market.