Saudi Arabia is, today, a relatively stable country
Saudi Arabia is currently characterized by a relatively stable environment, which is an important consideration for foreigners interested in property investment in the country.
If you are planning to invest in real estate, it is crucial to prioritize stability as it contributes to long-term growth and profitability. This information holds significance for foreigners seeking to purchase property in Saudi Arabia.
In recent times, Saudi Arabia has achieved a certain level of stability, as indicated by its score of 67.5 in the Fragile State Index, which is considered decent.
To maintain stability, Saudi Arabia has made substantial investments in its security and defense forces. Furthermore, the country has utilized its extensive oil reserves to support economic development and social welfare programs.
Now, let’s delve into further data to assess whether it is an opportune time to invest in Saudi Arabian real estate.
Saudi Arabia is positioned for strong growth
Before proceeding with real estate purchases, it is crucial to evaluate the country’s economic situation.
According to the IMF, Saudi Arabia is projected to experience a growth rate of 3.1% in 2023, indicating a positive trajectory. Additionally, the growth rate is expected to reach 3.2% in 2024.
Moreover, the country’s economy is anticipated to expand by 13.8% over the next five years, resulting in an average GDP growth rate of 2.8%.
The expected sustainable growth rate in Saudi Arabia is advantageous for individuals interested in real estate investment. It signifies a stable and growing economic environment that is likely to drive increased housing demand and higher property values over time. Consequently, investors have the potential to achieve substantial returns on their investments.
The movement of Property Prices in Saudi Arabia Remains Uncertain.
Over the past five years, Saudi Arabia has experienced a decline in home prices, with a decrease of -2.0% according to the Central Department of Statistics and Information. For example, if you had purchased a luxury apartment in Riyadh for $750,000 five years ago, its approximate value today would be around $735,000.
Despite this trend of stagnant prices, it’s important to note that it does not guarantee that property values will not appreciate in the future. Past stagnation does not necessarily indicate that prices will remain unchanged going forward.
However, it’s worth considering that local experts in the real estate market may have a different perspective on this matter.
In major cities like Riyadh and Jeddah, residents often express concerns about the high property prices. These elevated prices can be attributed to a limited number of individuals controlling the real estate market, as well as the concentration of activities in Riyadh, which makes it an appealing place to reside.
The demand for housing in Saudi Arabia has been on the rise due to government initiatives, including the construction of 500,000 homes and housing aid programs. Vision 2030, an ambitious national development plan, aims for 75% home ownership for Saudi nationals, with significant investments allocated to real estate projects that surpass the country’s GDP.
The presence of 15 mega-projects, such as NEOM, is expected to further stimulate demand and potentially lead to an increase in property prices, particularly in suburban areas like Oxagon, Sindalah, Trojena, and The Line, where luxury living standards are being pursued.
Inflation in Saudi Arabia
In Saudi Arabia, it is expected that inflation will remain at a moderate level.
When considering property investment, higher inflation can bring several advantages:
- Property values tend to appreciate over time, offering the potential for capital growth.
- Inflation can lead to higher rental rates, increasing the cash flow generated by the property.
- The real value of debt decreases with inflation, making mortgage payments more affordable.
- Real estate can serve as a hedge against inflation, preserving the value of the investment.
- Diversifying into real estate provides stability during periods of inflation.
- Tax advantages, such as depreciation deductions, can help offset the impact of inflation.
- Based on projections by the IMF, Saudi Arabia is expected to have an inflation rate of 10.5% over the next 5 years, resulting in an average annual increase of 2.1%.
To conclude, 2024 holds promising prospects for property investment in Saudi Arabia, supported by a range of positive indicators that suggest a favorable environment for real estate ventures. The country’s projected strong economic growth is a positive sign for property investors. Economic expansion often corresponds with an increased demand for housing and properties, which can potentially lead to the appreciation of property values over time.
The improving financial situation of Saudi Arabia’s population further enhances the appeal of property investment. As the population becomes more prosperous, the demand for housing and real estate is expected to rise, creating opportunities for both capital appreciation and potential rental income.
Notably, Saudi Arabia offers highly attractive rental yields, indicating the potential for significant returns on investment through rental income. This makes real estate an appealing choice for individuals seeking consistent and profitable returns.
While property prices may not experience significant fluctuations, and inflation is projected to remain at a moderate level, the combination of a stable country environment, appealing rental yields, and the potential for long-term value appreciation make 2024 a favorable year to explore property investment opportunities in Saudi Arabia.