The leading global professional services firm, Deloitte, has released its comprehensive Saudi Arabia Real Estate Report for the year 2023, providing valuable insights into the Kingdom’s property market growth and future prospects.
The report highlights the impact of the positive economic conditions in the Kingdom so far on the performance of the real estate market, as the gross domestic product (GDP) reached SAR 10.1 trillion (USD 2.6 trillion) in 2023 and is anticipated to grow to SAR 11.6 trillion (USD 3 trillion) by 2030. This is based on a projected annual growth rate of 1.6%, as per data sourced from Oxford Economics.
The trends in residential property is shifting towards homes that accommodate remote work facilities and incorporating wellness-centric features. The demand for flexible workspace is also witnessing a surge, compelling developers to innovate office designs tailored for hybrid work models. Similarly, the retail and hospitality sectors are also undergoing adaptation to cater to changing consumer behaviors, with a particular focus on experiential spaces.
Stefan Burch, Partner and Head of Real Estate at Deloitte Middle East “2023 continued to be dominated by strong levels of demand for commercial office space both from large corporates and SMEs reflecting robust economic activity in the Kingdom, while in the residential markets demand has shifted to apartment stock as affordability continues to be a key driver amidst a backdrop of higher interest rates. As the market continues to evolve, 2024 looks set to be dominated by the delivery of high quality mixed use schemes that more accurately respond to market demand both in terms of pricing and offering.”
Oliver Morgan, Partner and Head of Development in Deloitte’s Real Estate team in the Middle East said, “The Kingdom is now in delivery mode; the last 12 months have seen innovative approaches to bring key development projects to market. The sophistication of due diligence, regulations and use of technology are all changing the way investors and our clients are planning projects – all leading to a more institutional approach in delivery. Our Predictions for the market focus on continued growth in landmark funding deals, the impact of ESG as a value creator from lifecycle cost savings and how retail needs to evolve to stay relevant .”
Residential market
Transaction volumes in the residential sector have seen a decrease, yet sales prices for villas and apartments continued to ascend in 2023 compared to the previous year. Notably, Riyadh, Jeddah, and Dammam collectively recorded 67,233 residential transactions in 2023, totaling SAR 79 billion (USD 21 billion), reflecting a 15% decrease in value compared to 2022. Sales prices and rents have experienced notable growth across Riyadh and Jeddah.
Hospitality market
Saudi Arabia’s tourism industry is on the rebound, attracting 53.6 million visitors in in the first half of 2023, with 14.6 million inbound tourists and 39 million domestic tourists. This influx in tourism is projected to contribute 6% to the country’s GDP in 2023.
Efforts such as the facilitation of tourist visas for GCC residents, the extension of visa on arrival to UK, US and EU residents, has supported the country’s hospitality sector in the post pandemic period.
The KSA occupancy rate averaged 63% in 2023, showing an increase from 58.2% during 2022.
