Saudi Arabia’s real estate market has begun to show an overall improvement in business activity following a downturn caused by COVID-19, a report released by real estate firm Knight Frank showed Thursday, Trend reports with reference to Al Arabiya.
The coronavirus pandemic caused an economic crisis across the world, with businesses severely disrupted by lockdown orders and a reduction in activity. Saudi authorities, in response to the pandemic, implemented a slew of initiatives in order to contain the economic fallout and protect the Kingdom’s economy.
“Like other global economies, the pandemic has driven a widespread economic slowdown across the Kingdom, however improved business confidence during the closing months of 2020, underpin by economic reforms linked to Vision 2030 and the rapid response to COVID-19 has helped to drive a turnaround in performance in all main segments of the real estate market,” Faisal Durrani, the Middle East research head at Knight Frank said in a statement.
One measure Saudi authorities took to mitigate the impact of COVID-19 was to raise the Kingdom’s value-added-tax (VAT) to 15 percent, but a decision was taken to exempt real estate transactions from the change. This has resulted in a boost to the residential real estate market, Knight Frank explained.
Residential mortgage loans rose 38 percent in the 12 months ending February, with residential transactions increasing across the whole country.
Riyadh and Jeddah both saw increases, 25 percent and 34 percent respectively, over the past 12 months, but the Kingdom’s three main residential areas “have experienced diverging performance in values for apartments and villas,” Durrani said.
While apartment values in Riyadh, Jeddah, and the Dammam Metropolitan Area all increased, villa prices fell across the board.
The Kingdom’s ambitious Vision 2030 plan, which aims to prepare the country for a post-hydrocarbon age, envisions a massive increase in tourism. As such, a huge expansion of Saudi Arabia’s hotel capacity is underway – the largest in the world with supply expected to increase by 61.1 percent over the next three years according to STR Global.
“The hospitality market has been somewhat of a bright spot. Despite continued weakness in Riyadh, Jeddah and the Dammam Metropolitan Area have experienced strong growth in both average daily room rates, as well as revenue per available room,” Durrani said.