High-net-worth Muslims eye $2bn real estate investment in holy cities: survey

Eighty-four percent of those interested in buying residential property in Saudi Arabia are focused on the holy cities.
Eighty-four percent of those interested in buying residential property in Saudi Arabia are focused on the holy cities.
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Updated 10 March 2024
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High-net-worth Muslims eye $2bn real estate investment in holy cities: survey

High-net-worth Muslims eye $2bn real estate investment in holy cities: survey
  • The survey included almost 506 HNWI from nine countries with significant Muslim populations with a personal net worth exceeding $500,000

RIYADH: Saudi Arabia’s real estate market is set for an upswing as high-net-worth Muslim individuals plan to invest $2 billion in Makkah and Madinah properties, a recent survey indicated.

The survey was conducted by Knight Frank, a global property consultancy, and published in the firm’s inaugural Destination Saudi report. It found that among the individuals interviewed, a whopping 92 percent HNWI are planning to acquire branded residential units in one of the two holy cities— Makkah and Madinah.

“The holy cities of Makkah and Madinah represent some of the most sought-after Saudi locations for property ownership among global HNWI. The chance to live not only in the Kingdom but in one of the holy cities is itself a key demand driver,” said Vera Zabelina, a research analyst at Knight Frank.

 

It would be pertinent to mention here that the Kingdom’s real estate market is bracing for changes in foreign ownership regulations, notably with the introduction of new premium residency visa options linked to real estate ownership.

The aim of these changes is to draw in international investments amid challenges of affordability and changing market dynamics. This aligns with the Kingdom’s Vision 2030 blueprint, which looks toward a future less dependent on oil revenues and emphasizes top-tier housing for its citizens.

However, with the requirement of properties valued at least SR4 million ($1.06 million) and outright ownership, along with an annual visa renewal fee of SR100,000, the full impact of these changes may be gradual rather than immediate, according to the report.

In the survey, the consultancy was able to quantify, for the first time, the depth of demand to own real estate in Saudi Arabia for Muslim HNWI, particularly in the two holy cities.

The survey included almost 506 HNWI from nine countries with significant Muslim populations with a personal net worth exceeding $500,000. The findings showed that 82 percent of the respondents were interested in owning real estate in Saudi Arabia.

The demand drivers, according to the Knight Frank survey, are Saudi Arabia’s perception as a good investment opportunity with 60 percent of the respondents indicating so, and the significant influence of cultural and religious reasons among potential buyers, with 45 percent citing this as a key factor.

For Muslims, a journey to Makkah and Madinah is often seen as once-in-a-lifetime experience. Thus, the opportunity to own property in these holy cities is understandably very enticing, the report added.

However, historical ownership laws have made this prospect impossible. Even with the introduction of the new premium residency visa linked to property ownership, owning real estate in Makkah or Madinah is currently restricted to a 99-year leasehold basis.

“While the new premium residency visa options still do not permit outright ownership of real estate in the holy cities, the prospect of a 99-year leasehold title will undoubtedly fuel a wave of new purchasing demand from Muslim majority nations,” according to Mohamad Itani, partner at Knight Frank.

This was evident in survey results with 84 percent of those interested in buying residential property in Saudi Arabia are focused on the holy cities.

Specifically, 40 percent are interested in Makkah, 19 percent prefer Madinah, and 26 percent have no specific preference. For those seeking a primary residence in Saudi Arabia, 58 percent lean toward Makkah, while 20 percent favor Madinah.

The main drivers for desiring property ownership in the holy cities were predominantly investment opportunities, with culture and religion also playing significant roles. Meanwhile, those interested in Madinah also cited work and business reasons as additional motives.

Survey results also revealed that the average allocated budget for residential property in either of the holy cities amounts to $4.7 million, with total allocation by all 506 respondents totaling $2 billion. This underscores the substantial weight of international demand for real estate investment building overseas, according to the report.

According to Knight Frank’s analysis, the preference for cash payments among property buyers rises with personal wealth, ranging from 31 percent for those with under $500,000 net worth to 78 percent for those with over $3 million.

The opportunity for luxury housing and branded residences was further seen when 92 percent of surveyed HNWI Muslim respondents expressed eagerness to purchase such properties in the holy cities, with a spending appetite for branded residences that far exceeds the current apartment prices in these cities.

The potential arises from the scarcity of luxury housing in the desired holy cities, notably as the Thakher and Masar Makkah projects emerge as the sole planned giga developments with approximately 10,000 homes in the pipeline.

This represents a mere 1.5-2 percent of the total 660,000 units planned nationwide, indicating ample capacity for the real estate markets in the two cities, particularly Makkah, to accommodate a substantial influx of luxury housing.

Global HNWI were also found to be willing to commit substantially more, with 40 percent ready to invest over $10,000 per square meter for a branded home in Makkah, highlighting a significant market gap for high-end branded residences.

According to Knight Frank partner Faisal Durrani, “branded residences represent a significant area of opportunity for developers across the Kingdom, particularly given the high budgets among domestic branded residential purchasers. 69 percent of Saudis are interested in owning a branded residence … Furthermore, 55 percent of GCC HNWI are keen to secure branded residences in the Kingdom.”

“Clearly, the international wealthy feel the same, however a limited range of branded residences, lack of local financing options and no scope as yet for partial, or timeshare ownership remain key barriers,” he added.

The survey found that for potential buyers of branded residences in the holy cities, key factors that would increase their likelihood of purchasing include a desire for a wider selection of property types, and the availability of local financing options and fractional ownership options.

The desire to purchase a branded residence is primarily influenced by the expected high yield and investment potential, along with considerations for building maintenance, management, and the quality of service provision and amenities, as showed by the survey results.

Mohamad Itani, a Knight Frank partner and head of residential project sales and marketing, Saudi Arabia, said: “The management of branded residential purchases for the international HNWI should be a central consideration for developers. Remote purchasers will want to have peace of mind that their investments are well looked after and secure in a well-regulated environment.”

According to Knight Frank, branded residences are a rapidly growing sector in the Middle East’s real estate market, mirroring global trends among wealthy buyers seeking exclusivity.

Saudi Arabia is becoming a key market, with significant investment in branded offerings. According to the report, the region’s share of this market stands at 10 percent, indicating its increasing significance.

Knight Frank forecast a 120 percent increase in these properties by 2030, demonstrating confidence in the region’s real estate growth.

These properties offer unique allure, quality services, and premium amenities, attracting investors and ensuring asset appreciation. Owners enjoy exclusive benefits and a community of like-minded individuals.


Saudia orders additional 105 aircraft from Airbus

Saudia orders additional 105 aircraft from Airbus
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Saudia orders additional 105 aircraft from Airbus

Saudia orders additional 105 aircraft from Airbus

RIYADH: Saudia Group and flyadeal have signed a firm order for an additional 105 A320neo family aircraft, it has been announced at the Future Aviation Forum in Riyadh.

The order comprises 12 A320neo and 93 A321neo aircraft, and increases Saudia Group’s Airbus aircraft order backlog to 144 A320neo family aircraft.

The agreement was announced in the presence of Minister of Transport and Logistic Services Saleh bin Nasser AI-Jasser, Director General of Saudia Group Ibrahim Al-Omar, and Benoît de Saint-Exupéry, executive vice president sales of the commercial aircraft business.


Saudi-Chinese financial ties to strengthen as top officials meet in Beijing

Saudi-Chinese financial ties to strengthen as top officials meet in Beijing
Updated 20 May 2024
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Saudi-Chinese financial ties to strengthen as top officials meet in Beijing

Saudi-Chinese financial ties to strengthen as top officials meet in Beijing

RIYADH: Saudi and Chinese top officials are holding joint meetings in Beijing focused on fostering international economic growth.

The sessions, which are slated to take place from May 20 - 21 in Beijing, include the Kingdom’s Minister of Finance Mohammed Al-Jadaan, the newly appointed Vice Minister of Finance Abdulmuhsen Al-Khalaf, along with officials from the Ministry of Finance, the National Center for Privatization, and the Saudi Central Bank.

Officials from the Capital Market Authority, Zakat, Tax and Customs Authority as well as the National Development Fund, are also part of the delegation, as well as representatives from the Saudi Fund for Development, and the National Infrastructure Fund.

In a post on his X account, Al-Jadaan said: “Today (May 20), as part of my visit to China, I met with the Chinese Minister of Finance, Lan Fo’an. We discussed ways to enhance the finance, trade and investment cooperation between Saudi Arabia and China to advance prosperity and growth for the global economy.”

The Saudi finance minister and his Beijing counterpart co-chaired the third meeting of the Financial Sub-Committee for the High-level Chinese-Saudi Joint Committee, where Al-Jadaan emphasized that China is a key partner in the Kingdom’s transformation under Vision 2030, according to a statement by the Saudi Finance Ministry.

The release added that the minister would participate in a roundtable discussion organized by the NCP in cooperation with the Industrial and Commercial Bank of China.

Al-Jadaan will also speak with various Chinese ministers, officials, and investors, focusing on recent economic and financial developments, shared interests, and investment prospects in Saudi Arabia, aligning with the Kingdom’s Vision 2030 goals.

Meanwhile, Al-Khalaf and the Chinese Vice Minister of Finance, Liao Min, will co-chair a roundtable meeting hosted by the Chinese Ministry of Finance and organized by the China Development Bank and the China Investment Corp.

Al-Jadaan’s visit to the Asian powerhouse comes after he used a panel discussion at the Qatar Economic Forum on May 14 to urge financial planners to optimize their strategies to curb “economic leakage” and prevent resources or funds from being wasted.

Calling for the adoption of prudent fiscal policies, the minister said at the event that spending during a time of global inflation results in increased project costs, which he believes further fuels inflation and “overheats” the economy.

Diplomatic and economic ties between Saudi Arabia and China have been strengthening in recent years, and in November the Kingdom’s central bank, also known as SAMA, and the People’s Bank of China signed a local currency swap agreement worth $6.93 billion.

The agreement will last three years, but China’s central bank said at the time it can be extended after two years by mutual agreement.


Saudi Arabia’s first quantum computer on its way after Aramco, Pascal deal

Saudi Arabia’s first quantum computer on its way after Aramco, Pascal deal
Updated 20 May 2024
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Saudi Arabia’s first quantum computer on its way after Aramco, Pascal deal

Saudi Arabia’s first quantum computer on its way after Aramco, Pascal deal

RIYADH: Saudi Arabia's first quantum computer is set to be installed after energy giant Aracmo signed an agreement with computing firm Pasqal.

Under the deal, the French company will install, maintain and operate a 200-qubit device, scheduled for deployment in the second half of next year, according to a press statement. 

A quantum computer uses qubits to run multidimensional algorithms, and these machines are capable of solving complex problems faster than traditional computers.

Ahmad Al-Khowaiter, executive vice president of technology and innovation at Aramco, said the deal with Pasqal is expected to bring high-performance information processing to Saudi Arabia. 

“In a rapidly evolving digital landscape, we believe it is crucial to seize opportunities presented by new, impactful technologies and we aim to pioneer the use of quantum computing in the energy sector,” said Al-Khowaiter. 

He added: “Our agreement with Pasqal allows us to harness the expertise of a leading player in this field as we continue to build state-of-the-art solutions into our business. It is also further evidence of our contribution to the growth of the digital economy in Saudi Arabia.” 

The quantum computer that will be installed in Saudi Arabia will initially use an approach called “analog mode.”

Within the following year, the system will be upgraded to a more advanced hybrid “analog-digital mode,” which is more powerful and able to resolve more complex tasks, the statement added. 

The agreement follows a memorandum of understanding signed between Aramco and Pasqal in 2022 to collaborate on quantum computing capabilities and their applications in the energy sector.

Georges-Olivier Reymond, CEO and co-founder of Pasqal, noted that the agreement would see the commercial adoption of quantum computers in the Kingdom. 

“This isn’t just any quantum computer; it will be the most powerful tool deployed for industrial usages, unlocking a new era of innovation for businesses and society,” said Reymond. 

Earlier this month, Aramco also signed three MoUs with US firms, including Aeroseal, Spiritus, and Rondo, to accelerate the development of potential lower-carbon solutions.

In May, Aramco also announced its financial results for the first three months of this year. 

The company revealed that its net profit reached $27.27 billion in the first quarter, representing a rise of 2.04 percent compared to the last quarter of 2023.


Closing Bell: Saudi main index edges down to close at 12,198

Closing Bell: Saudi main index edges down to close at 12,198
Updated 19 May 2024
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Closing Bell: Saudi main index edges down to close at 12,198

Closing Bell: Saudi main index edges down to close at 12,198

RIYADH: Saudi Arabia’s Tadawul All Share Index slipped on Sunday losing 0.06 points to close at 12,198.38.  

The total trading turnover of the benchmark index was SR4.42 billion ($1.18 billion) as 60 stocks advanced, while 160 retreated.  

On the other hand, Nomu, the parallel market, rose 577.98 points, or 2.18 percent, to close at 27,062.01. This comes as 28 stocks advanced while as many as 33 retreated.

Meanwhile, the MSCI Tadawul Index slipped 1.45 points, or 0.09 percent, to close at 1,528.60.

The best-performing stock of the day was Lazurde Co. for Jewelry. The company’s share price surged 10.00 percent to SR16.06. 

Other top performers included Middle East Specialized Cables Co. as well as Aldrees Petroleum and Transport Services Co.

The worst performer was Zahrat Al Waha for Trading Co., whose share price dropped by 10 percent to SR45.45.

Makkah Construction and Development Co. as well as Jazan Development and Investment Co also performed poorly.

On the announcements front, Kingdom Holding Co. announced its interim financial results for the period ending March 31. 

According to a Tadawul statement, the company’s net profit hit SR196 million in the first quarter of 2024, reflecting a 14.6 percent surge when compared to the similar quarter last year. 

The increase is mainly due to a rise in the sale of investment property, a surge in the share of results from equity-accounted investees, and a decrease in financial charges. 

It is also linked to an increase in finance income as well as a drop in withholding and income tax.

Moreover, Dar Alarkan Real Estate Development Co. announced its interim financial results for the first three months of 2024. 

A bourse filing revealed that the firm’s net profit reached SR153.5 million by the period ending March 31, up 30.57 percent from the corresponding period in 2023. This surge is primarily attributed to higher property sales. 

Furthermore, Middle East Paper Co. announced its interim financial results for the year’s first quarter. 

According to a Tadawul statement, the company recorded a net loss of SR18 million in the first three months of 2024, compared to a net loss of SR7 million in the same period of the previous year.

This is mainly owed to reduced gross profit, a jump in general and administrative dues, and increased finance and zakat expenses. 

Red Sea International Co. also announced its interim financial results for the period ending on March 31. 

A bourse filing revealed that the firm’s net profit stood at SR13.3 million at the end of the first quarter of 2024, compared to a net loss of SR19.5 million recorded in the same quarter a year ago. 

This is mainly the result of the strategic business transformation, which included acquiring 51 percent of First Fix and effectively executing and delivering projects.

Meanwhile, Saudi Manpower Solutions Co., announced the completion of the institutional book-building process and the determination of the final offer price for its initial public offering on the main market of the Saudi Exchange.

According to a company statement, the final offer price has been set at SR7.5 per share, with a market capitalization of SR3 billion at listing. The price range for the offering was set at SR7 to SR7.5.   

The institutional book-building process generated an order book of around SR115 billion and was 128 times oversubscribed, indicating strong investor demand.   


Baheej unveils waterfront development project in Yanbu 

Baheej unveils waterfront development project in Yanbu 
Updated 19 May 2024
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Baheej unveils waterfront development project in Yanbu 

Baheej unveils waterfront development project in Yanbu 

RIYADH: Saudi Arabia’s tourism sector continues to expand, with Baheej Tourism Development Co. unveiling a new waterfront development project in Yanbu. 

This joint venture between ASFAR, a Saudi tourism investment company owned by the Public Investment Fund, and the Tamimi-AWN Alliance, aims to develop the waterfront area of the Royal Commission at Yanbu. 

The initial project will cover 32,000 sq. m. and feature three leisure assets: a beach, a tourist activation center, and a hotel. It is set for complete unveiling in 2027. 

A fourth component is scheduled to be announced at a later date. 

According to a release, each aspect of the project aims to provide memorable and sustainable tourism experiences. 

Visitors will soon have the opportunity to explore Yanbu, a city with a rich history dating back to the 16th century, renowned for its architectural heritage and sandy beaches. 

Baheej envisions Yanbu as an iconic location that showcases Saudi Arabia’s culture, history, and natural beauty, providing a unique destination to tourists. 

Nora Al-Tamimi, CEO of Baheej, outlines the project’s development in three phases, emphasizing community engagement, sustainability, and minimal environmental impact.  

Al-Tamimi said: “We believe that destinations are not just built but discovered, and Baheej’s commitment lies in uncovering Saudi Arabia’s hidden gems. Our strategic collaborations are aimed at curating unparalleled experiences that showcase Saudi Arabia’s rich culture, history, and natural wonders.”  

She added: “Yanbu City’s contemporary infrastructure, captivating environment, and attractive coastal landscapes make it an exceptional gateway to the Red Sea Riviera. We anticipate the complete unveiling of our destination and its components by the end of 2027.”   

By analyzing risks and investment opportunities, the project aims to position Yanbu as a locally and internationally sought-after tourist destination, explained Al-Tamimi. 

Baheej’s role will involve integrating local culture and promoting protection of the planet, enhancing Yanbu’s appeal and supporting regional development. 

This approach aims to transform Yanbu’s hospitality sector, blending community heritage with environmental stewardship. 

Established in 2023, Baheej aims to create accessible tourism experiences that meet international standards while remaining contextual and sustainable. 

These initiatives are part of a broader strategy to transform Saudi towns into thriving, eco-friendly destinations. 

Baheej also plans to announce additional projects in other cities by the end of 2024.