RIYADH, SAUDI ARABIA — The Saudi gross domestic product increased by 8.6 percent in the third quarter of 2022. The growth rate is anticipated to reach 3.8 percent by the end of the year before moderating to 7.3 percent and 3.3 percent in 2023 and 2024, respectively, according to the World Bank.
Increased demand for tourists and the rise in government spending on infrastructure projects such as the construction of Riyadh Airport, among others, drove the post-pandemic recovery. Such developments are anticipated to raise the demand for properties with exceptional locations, particularly offices and logistics facilities. In addition, changing client preferences in the hospitality, housing, and retail sectors have forced developers to reinvent the hotels, dwellings, and entertainment components of the Kingdom’s immediate development plans.
The ninth annual Middle East Real Estate Outlook 2023 study from Deloitte examines the performance of the real estate markets in Dubai and Saudi Arabia over the past year. The paper gives an optimistic view for 2023 and examines several real estate sectors, such as hotel, residential, retail, commercial, and industrial offices.
The analysis demonstrates, as one of its core conclusions, that tourism in Dubai and Saudi Arabia has recovered after COVID-19, with the primary indications in the hospitality sector being the rise in occupancy and average daily rates over the past year (ADR). The survey also notes an increase in residential sales in both regions and a surge in Dubai commercial office space rental rates. At the same time, the significant growth in the GDP of Saudi Arabia makes it among the most attractive global destinations for investors.
Dubai
Dubai’s residential real estate market is on a steady trajectory, and prices are anticipated to climb at a moderate rate over the next two years; real estate prices are expected to remain accessible over this time frame.
According to the Dubai Land Department’s data, the real estate market had a continual increase in sales following the recovery of Dubai’s economy from the effects of the Coronavirus pandemic. As a result, home prices in Dubai were predicted to grow 3 percent this year and 2.5 percent in 2022, compared to projections for an increase of 1.1 percent and 2.8 percent.
The Palm Jumeirah experienced the highest price increase of 5 percent in the apartments sector, followed by Mohammed bin Rashid City, Meydan City, and Living Legends, as all of these complexes recorded an increase of 4.7 percent in average real estate prices; for villas, the highest growth was recorded at 4.6 percent in Emirates Hills, 4.1 percent in Mudon, 3.9 percent in Jumeirah Village Circle, and 3.1 percent in Mohammed Bin Rashid City.
In addition to the previously listed places, the real estate markets in Jumeirah, Jumeirah Beach Residence, Arabian Ranches, and Dubai Marina are anticipated to lead the market in 2023.
Dubai’s real estate industry has rebounded post-pandemic due to pent-up demand from tourists and increasing spending by locals. However, inflation remains a concern for consumers and is anticipated to impact sentiment through 2023. The average occupancy in Dubai in November 2022 year-to-date was 72 percent, compared to 63 percent for the same period in 2021, while the average ADR climbed by 22 percent year-over-year. This is significantly higher than the majority of regional and worldwide markets.
Saudi Arabia
According to the World Bank, Saudi Arabia’s gross domestic product increased by 8.6 percent in the third quarter of 2022 and is projected to increase by 8.3 percent in the fourth quarter of 2022 before slowing to 3.7 percent and 2.3 percent, respectively, in 2023 and 2024.
During the first nine months of 2022, the residential real estate supply in the major markets, notably Riyadh, Jeddah, and Dammam, increased compared to the same period in 2021. Diyar Al-Saad Housing Complex, Al-Ajlan Riviera 21 in Riyadh, Al-Fareeda Housing, and Nesej Town 2 in Dammam, to name a few, comprised the most significant portion of the supply for the year 2022, with the majority of these projects coming from the Ministry of Housing, According to Deloitte’s latest report: “KSA Real Estate Predictions 2023”.
During the first nine months of 2022, the total number of residential real estate transactions in Riyadh, Jeddah, and metropolitan Dammam reached 95,000 transactions with a total value of US$ 5.142 bn. Its value is 5 percent greater annually than it was in 2021. Moreover, sales and rental prices increased in Riyadh, Jeddah, and Dammam.
The first three months of 2022 were the strongest in terms of occupancy performance in Riyadh, hitting 76 percent in March. In May, hotels in Jeddah had the highest occupancy rate, at 59 percent. Official data issued in January showed that residential real estate prices in the Kingdom increased during 2022 at the fastest pace in 8 years, mainly driven by an increase in the prices of residential plots.