RIYADH: Saudi Arabia plans to issue real estate bonds in global markets worth up to SR150 ($40 billion) by 2030, Minister of Municipalities and Housing Majid Al-Hogail said in an interview with Asharq News.
Speaking on the sidelines of the World Urban Forum in Baku, Azerbaijan, Al-Hogail said the Kingdom is awaiting the stabilization of the geopolitical situation, which has impacted global financing costs, before beginning annual real estate bond issuances this year, targeting SR20 billion.
A $5bn international sukuk program
The Kingdom is relying on real estate sukuk issuances to alleviate the financing burden on the banking sector, which is already facing liquidity pressures due to financing mega-projects under Vision 2030.
Last year, the Saudi Real Estate Refinance Co., a subsidiary of the Public Investment Fund, listed a $5 billion international sukuk program on the London Stock Exchange. It has already issued $2 billion in sukuk through this program, which was met with strong demand, reaching six times the amount offered, according to a statement on the sovereign wealth fund’s website.
Real estate market balance policies completed
Al-Hogail indicated that the package of measures to regulate the real estate market in the Kingdom has been completed with the adoption last week of the executive regulations for fees on vacant properties, following the earlier approval of fees on undeveloped land.
He added that the reform package has begun to bear fruit, noting: “We are starting to see record numbers of licenses issued in Riyadh, which means there will be a large supply entering the market. The higher the supply than the demand, the more we will achieve the real estate balance we aspire to.”
Real estate measures reduce rents by 15% in Riyadh as supply increases
The supply of residential real estate in Riyadh increased by 30 percent, while rents decreased by 15 percent last year, following measures taken by Saudi Arabia to stabilize the real estate market in the largest Arab economy, according to Abdullah Al-Hammad, CEO of the Real Estate General Authority.
In an interview with Asharq News on the sidelines of WUF, Al-Hammad said: “Riyadh used to add approximately 50,000 units annually. As a result of the stabilization measures, and based on the projected figures for 2025, this has increased to 65,000 residential units, a rise of 15,000.”
The government has taken several measures in recent years to regulate the real estate market, particularly in the capital, by imposing fees on undeveloped land, regulating undeveloped land, and freezing rents in Riyadh for five years. These measures were implemented alongside the launch of large-scale housing projects and incentives for local and international developers to increase supply, in an effort to achieve a more sustainable balance between supply and demand.
In its latest move, the Kingdom last week approved the executive regulations for fees on vacant properties, amounting to up to 5 percent of the building's value.
Rents decline
Al-Hammad noted a significant improvement in the “rent-to-income ratio for all households in Riyadh, with a decrease of up to 15 percent in this cost.” He added that there is a shift in behavior within the sector from land trading to purchasing the final product, indicating a market transformation from quantitative to qualitative demand.
This comes as indicators begin to reflect a clear slowdown in the pace of real estate inflation in the Kingdom. Data released by the General Authority for Statistics at the end of last month showed a decline in property prices for the second consecutive quarter, amid increasing indications of the tangible impact of government interventions, particularly in the capital, Riyadh.
According to the authority’s data, residential property prices, the largest component of the index, fell by 3.6 percent year on year in the first quarter, following a 2.2 percent decline in the previous quarter. This drop was driven by a similar decrease in residential land prices, indicating that the pressure is no longer confined to the periphery of the market but has extended to the segment that most significantly influences pricing across the entire sector.
Most notably, villa prices, which had long been more resilient than other categories, recorded a 6.1 percent decline, the largest drop since the first quarter of 2022.
