Residential and Commercial Real Estate in Saudi Arabia and the GCC: Overview and Trends

The GCC (Gulf Cooperation Council) will be one of the fastest regions to grow in 2022 at an estimated 5.2%, almost twice that of 2021. Although regional recovery has lagged compared to the region’s neighbors over the last 12 months, 2021 has been a successful recovery year, with GCC GDP expected to outperform pre-pandemic levels in Q1 2022.

While this recovery is projected to be buoyed by oil related sectors, with many countries in the region focusing on diversification of industries and different social programs, other sectors, such as real estate, are also expected to see recovery and booms in the coming quarters.

Like its neighbors, expected GDP growth in Saudi Arabia in 2022 is largely directed from increasing oil prices and higher production. However, there are also many positive indicators of stability and recovery in the Kingdom’s real estate sector and experts predict that real estate prices will stabilize after a long period of decline since 2015.

Real estate is the second largest contributing sector to the Saudi GDP, and it is linked to the growth of more than 120 other economic sectors, the Housing Minister said. In addition, the percentage of local content in real estate projects jumped from 35% to 81% this year, exceeding the 75% target, he added.

In fact, Saudi Arabia is expected to have the highest demand for housing units among the Gulf Cooperation Council by 2022, with 3.95 million housing units. The move supports Crown Prince Mohammed bin Salman’s Vision 2030 of increasing homeownership to 70% by the end of 2030.

Additionally, the COVID-19 pandemic and its aftereffects have sparked a change in consumer behavior which is proving to be one of the main factors enabling the real estate sector to bounce back in Saudi Arabia.

Due to many companies being forced to move towards work from home and hybrid models, the commercial real estate sector faced many downturns during the height of the pandemic. Now, with increased vaccinations and other social programs underway in much of the GCC region, and workers returning to office life, the commercial real estate sub-sector is expected to post healthy growth.

Moreover, resuming work from office spaces and an increase in tourism is expected to improve the overall demand for the office, commercial, and hospitality sectors.

As an example, Ajdan, a lifestyle developer based out of Al-Khobar in KSA, hopes to hit upon all these opportunities with residential, commercial, and entertainment offerings in their innovative Ajdan Waterfront development where guests can enjoy exclusive residential spaces at Ajdan Rise, open-air food, beverage, and shopping outlets at Ajdan Walk, a stunning event space at Ajdan Terrace, a brand-new luxurious AMC Cinema theatre, and an upcoming five-star Fairmont Hotel.

Overall, residential and commercial real estate in Saudi Arabia is set to grow drastically, and various Vision 2030 mega projects such as Neom, Red Sea, Qiddiyah, and more, are to shape the future of the sector.

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