Gigaprojects, higher govt spending to boost Saudi property market: JLL

Rising government spending and progress on gigaprojects are working as a catalyst for future investment opportunities in Saudi Arabia’s real estate sector, JLL said in its 2018 “Year in Review” report.

“The government’s continued focus on strengthening the business environment and attracting foreign investment should have a positive impact on the real estate sector in the long run,” said Dana Salbak, associate, JLL MENA.

GDP growth level is expected to reach 2.4 percent last year, up from a contraction of 0.9 percent in 2017, according to Oxford Economics. Besides, 2019 is expected to witness ongoing activity on the back of the Kingdom’s largest ever expansionary budget (SAR 1 trillion in spending), and commitment to driving economic growth in line with Vision 2030’s objectives.

With conditions remaining soft across most sectors of the market in 2018, the hospitality and entertainment industries witnessed several major development announcements by the Public Investment Fund such as Al Qiddiya in Riyadh and Amaala, a luxury wellness destination.

“These milestone projects are key drivers of Saudi Arabia’s non-oil economic growth and are expected to trigger other largescale real estate development activity. In addition, the wave of development across the Kingdom and other reforms promoting Saudization are expected to create a surge of job opportunities in the long run” Salbak added.  

The entertainment sector saw the return of cinemas sparking development opportunities and significant retail opportunities in the field of "shoppertainment". While economic reforms have weighed on the purchasing power of residents, primarily VAT, subsidy cuts and expatriate levy, the retail sector overall is set to benefit from the long term growth potential presented by reformative changes, the consultancy noted.

Meanwhile, the inauguration of the King Salman Energy Park (Spark) in 2018 is another milestone project expected to fuel demand for commercial and industrial real estate in the Eastern Province.

“The market dynamics in Saudi Arabia have seen a major shift in the last year, with significant government investment and new reforms expected to have a positive long term impact on the Kingdom’s real estate market,” said Thierry Delvaux, CEO, JLL MEA.