A new regional investment magnet emerges

Saudi real estate high on the agenda for the region’s wealthy

As with our deep dive into GCC-based High Net Worth Individuals (HNWI) interest in the Kingdom’s Giga projects, we wanted to also understand the regional appetite to invest in existing Saudi cities through Survey 3.

Perhaps unsurprisingly, the appeal of real estate in the Kingdom is high, likely driven in large part by the stellar economic growth that has bedded in following the launch of Vision 2030. Indeed, 83% of our GCC-based respondents are interested in purchasing a property anywhere in Saudi Arabia. And these are seasoned investors with extensive property portfolios across the Middle East.

GCC-based HNWI respondents with a net worth of over US$1 million (34%), for instance, own more than four properties, besides their main residence, compared to 28% of those with a net worth of between US$ 500,000-1 million.

And Saudi isn’t absent in our respondents’ portfolios – we just expect the share to grow rapidly once more investment options materialise. Survey 3 shows that the UAE (24%) is the most common location to own real estate, closely followed by Saudi Arabia (14%) and then Egypt (11%).

Capital gains named as top investment driver

With the growing level of internal migration, there is anecdotal evidence to suggest many vendors are moving their properties to the rental market to cater to rising demand for short-term leases, particularly from young and single Saudis. This trend is particularly common in the capital city, Riyadh, where the removal of properties for sale has fuelled sharp price rises in the last two years.

The stellar price rises – up to 40% year on year for villas in some of Riyadh’s most sought-after neighbourhoods – have not escaped the attention of the region’s investors. Survey 3 shows that GCC-based HNWI would, for the most part, make a residential acquisition ‘purely for investment or capital gains’ (42%).

A second home (18%) and a buy-to-let (13%) follow in second and third place, respectively.

Survey 3 also shows that 54% of those purchasing ‘purely for investment or capital gains’ have very high expectations for continued price growth – to the tune of 8% p.a. for the next 3-5 years. It is worth noting that average apartment prices rose by 6.5% (in Jeddah) and 27.5% (in Riyadh) during 2022.