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Real estate exchange transforms Saudi market

A general view of an event to mark the recent launch of a new "Real Estate Market" platform in Riyadh. (SPA)
  • MENA's first real estate stock exchange, launched recently in Saudi Arabia, plans to digitize 180 million documents while offering comprehensive financing services
  • New Saudi platform saw US$270 million transactions in first two days with 140,000 beneficiaries as real estate prices increased 0.8% in the second quarter of 2023

RIYADH – In a groundbreaking move, Saudi Arabia has unveiled the MENA region’s inaugural real estate stock exchange, marking a transformative moment for property trade in the Kingdom.

The exchange isn’t just a platform for buying and selling real estate. It promises a comprehensive suite of services, from mortgage and real estate financing to bond issuance.

The stock exchange provides options for indices, real estate inquiries, and real estate documentation services. It is also a platform for real estate wealth management. The platform also gives freedom of supply and demand, speed in executing real estate transactions, and accuracy in providing high-quality and efficient data.

With a focus on digitization, the Kingdom aims to bring all 180 million real estate documents onto this platform.

Within two days, the Saudi real estate stock exchange recorded massive deals exceeding SAR1 bn (US$ 270 million).

The Saudi Ministry of Justice revealed that 140,000 people benefited from the real estate stock exchange within two days of the official launch, an increase of 200 percent, while deals were recorded in real estate trading amounting to SAR 1.2 billion.

Saudi Justice Minister Walid Al-Samaani at an event to mark the recent launch of a new “Real Estate Market” platform in Riyadh. (SPA)

During its “experimental” phase, the stock received about 1,000 beneficiaries per hour. In contrast, the number of beneficiaries increased after the official launch, reaching an average of 3,000 beneficiaries per hour within two days of the launch.

The experimental phase of the Saudi real estate stock was launched in November 2021 by the Ministry of Justice, and it included direct sales, real estate offers, new deals, mortgages, sukuk inquiries, and updating the real estate deed.

Subsidized financing

Subsidized residential real estate financing provided by banks and financing companies decreased by 24 percent on an annual basis during July 2023, for the 13th consecutive month, to reach SAR 5.6 billion (almost US$ 1.5 million) and decreased by 9 percent monthly, according to the Central Bank of Saudi Arabia.

At the same time, the real estate prices in the Kingdom increased slightly during the second quarter of this year by 0.8 percent, according to the General Authority for Statistics.

The Saudi real estate price index increased to 82.52 points in the second quarter of 2023 from 81.88 points at the end of the same period of last year, affected by the increase in the prices of residential real estate by 1.1 percent and commercial real estate by 0.2 percent, compared to a decrease in the price index of agricultural lands by 0.3 percent.

In contrast to the slight increase in real estate prices in the Kingdom, housing rents continue their upward trend, which indicated that actual housing rents rose in June for the sixteenth consecutive month, as they increased by 10.8 percent annually. This was driven by the 23 percent increase in apartment rents in particular.

Low demand for houses

Saudi Arabia witnessed a dramatic shift in the residential real estate market between 2022 and 2023, with the desire to buy homes declining from 84 percent to 40 percent, according to the latest figures, according to a report by the consulting company Knight Frank.

The main reason for this decline is high prices and changing market dynamics.

During the first quarter of 2023, buying and selling transactions in the residential real estate sector decreased by about 57 percent in Riyadh and 67 percent in Jeddah annually. One of the main factors behind the decline in the desire to buy homes is the high prices.

According to the report, villa prices in Riyadh jumped 40 percent last year, while apartment prices jumped 50 percent.

Knight Frank also indicated in its report that the continued flow of business to Saudi Arabia from all over the world increased the demand for commercial real estate to unprecedented levels, especially after the rise in the number of new business licenses last year by 54 percent.

Occupancy rates for category “A” and “B” offices, especially in the capital, Riyadh, reached 97 percent and 85 percent, respectively, in light of a clear shortage in supply. For example, about 800,000 square meters of new offices are planned in Riyadh by 2025.

Rent hike

The momentum of office property rental activity in Saudi Arabia continued in the second quarter of this year in light of the influx of demand from international and government entities for offices, according to a report issued by “CBRE.”

Office rents in Riyadh continued to rise, as rents for luxury offices increased in the second quarter by 12.2 percent, and second-class offices increased 14.4 percent year-on-year.

Rents for luxury offices in Jeddah also recorded the highest rate of rent growth among the cities tracked by the report, as average rents grew by 20.7 percent in the year to the second quarter of 2023 with an occupancy rate of 92.5 percent, while second-class office rents improved marginally by 1 percent during the same period, with an occupancy rate of 80 percent.