Oil resurgence supports Saudi construction industry: report

Saudi Arabia's construction industry is expected to recover in 2019, with the industry’s output expected to register a growth of 1.9 percent in real terms following three years of contraction, UK-based data analytics firm GlobalData said in a recent report.

"This momentum is expected to continue throughout the forecast period (2019-2023), driven by a recovery in crude oil prices coupled with the government’s investment towards new oil and gas projects and sewage infrastructure," it added.

Furthermore, the government’s plan to develop transport infrastructure and affordable houses in the country is expected to support industry output over the forecast period.

The report expects the residential construction market to register a forecast-period CAGR of 4.62 percent in nominal terms, driven by the government plans to meet the rising demand for affordable houses in the country.

In 2018, the government launched a loan-guarantee program with a total investment of SAR 30.5 billion ($8.2 billion). Of the total investment, the government plans to allocate SAR 18 billion ($4.8 billion) to provide housing loans to the low-and middle-income citizens in the country, and SAR 12.5 billion ($3.4 billion) to provide down payment support to economically weak home buyers by 2030.

Forecast-period growth in the institutional construction market will be driven by the government’s focus on education and healthcare infrastructure. In the 2019 budget, the government increased its spending on the healthcare sector by 8.2 percent, going from SAR 159.0 billion ($42.4 billion) in 2018 to SAR 172.0 billion ($45.9 billion) in 2019.

Furthermore, under the Vision 2030, the government plans to spend SAR 23 billion ($6.1 billion) to build new hospitals and other healthcare buildings in the country during 2017-2021.

Meanwhile, the total construction project pipeline in Saudi Arabia, including all mega projects with a value above $25 million, stands at SAR3.7 trillion ($977.4 billion).

The pipeline, which includes all projects from pre-planning to execution, is skewed towards late-stage projects, with 71.4 percent of the pipeline value being in projects in the pre-execution and execution stages as of April 2019, GlobalData noted.