JEDDAH, 17 April 2005 — Saudi Arabia’s real estate sector is booming prompted by the continuous repatriation of funds from overseas locations, especially since the 9/11 events of 2001 in the United States.
Industry leaders say that even in the days when there was slowdown in the regional economy due to worldwide recession, the Kingdom’s economy remained vibrant and so was its building and construction industry.
And now with oil prices skyrocketing and the Kingdom’s oil revenue swelling, there has been an unprecedented increase in the business and investment activity, resulting in new projects in both public and private sectors.
The real estate sector in the region, and particularly across the Kingdom, is currently witnessing a tremendous growth level, according to Solaiman Al-Majed, chairman of the Tanmiyat Group. “The growth is considered the second highest in the world after Shanghai,” he is quoted to have said at a symposium on the region’s real estate held in Sharjah. The Saudi specialist estimates the current volume of the Saudi real estate sector at about SR20 billion. He also said that the rising prices of oil are the main cause of the booming real estate sector all over the Gulf.
In fact, government projects and initiatives providing greater opportunities for the involvement of the private sector continue to ensure that the construction industry is the largest non-oil economic sector in the Kingdom. During 2005, the Kingdom’s construction and building materials sector is expected to contribute more than $15 billion to its economy.
In 2003, according to estimates, building materials alone accounted for imports in excess of $4.5 billion and that domestic and international investment in the Kingdom’s real estate exceeded $300 billion, ensuring strong and prolonged growth in all areas of building and interiors.
Higher than expected oil prices in 2003 and positive economic growth rates enabled the Kingdom to increase its 2004 budget allocations for the construction of 3,030 new schools, 3,800 km of new highways and roads, water and electricity, new desalination projects, dams and water and sewage projects, and municipal projects.
These projects are as a result of the continuing need for the Kingdom to provide an ever increasing infrastructure for its burgeoning population as well as meeting the demands of a growing economy, while also maintaining, repairing and upgrading much of what was built during the 1970s - a sector that is estimated at $6 billion annually.
Recognizing the need to diversify and reform its economy, the Kingdom has taken initiatives and provided incentives, combined with the relaxation of real estate laws. These steps have benefited the private sector that is investing heavily in residential and commercial building as a consequence of the rapid population growth.
It is estimated that 555,000 individuals will need to be housed each year. The public and private sector developers will also need to construct 100,000 residential units a year.
The Kingdom’s furniture and interiors market is the largest in the Middle East with an estimated market value of more than $600 million. The Kingdom is also developing its tourism industry and visitor numbers are expected to reach 44 million by 2023, contributing $22 billion to the economy.
The two growth factors - population and tourism - will have a positive impact on other sectors of the economy, especially in the development and refurbishment of restaurants, shopping malls, leisure resorts and theme parks, hotels, and more modern commercial complexes, providing business opportunities for interiors and furniture suppliers unparalleled in the Arab world.
