Riyadh property market swells as mortgages surge 250%

Residential mortgages for individuals in the Kingdom recorded a growth rate of more than 250 percent, with the value of contracts rising over 160 percent. (Shutterstock)
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Updated 29 January 2020

Riyadh property market swells as mortgages surge 250%

  • Vision 2030 economic reforms and major infrastructure projects encourage investment into capital’s real estate sector

LONDON: Riyadh recorded a 250 percent jump in mortgages last year as the value and number of property deals surged in the Saudi capital.

The volume of real estate transactions rose by 53 percent in 2019 compared to a year earlier while the value of transactions was up 63 percent according to a report from broker CBRE.

“The recent economic and social initiatives and legislation introduced by the Saudi Government have already had an extremely positive impact on the country’s real estate sector,” said Simon Townsend, head of strategic advisory at CBRE MENAT. “We are already starting to witness impressive growth across major real estate segments including residential, hospitality and retail, and this upwards trajectory is likely to continue in the short to medium term.”

Ongoing economic reforms under the Vision 2030 initiative have encouraged investment into the real estate sector while spending on major infrastructure projects such as the Riyadh Metro and tourism developments on the Red Sea coast have helped to boost confidence despite oversupply concerns.

“Overall, the country is making great leaps in its efforts to become a global business hub and world-class tourism destination, and the market is expected to continue to react positively to the efforts of the public and private sectors alike,” added Townsend.

Residential mortgages for individuals in the Kingdom recorded a growth rate of more than 250 percent in terms of the number of contracts signed from January 2019 — November 2019, according to the CBRE data. The value of contracts rose by more than 160 percent in the same period year-on-year. 

FASTFACT

At the end of last year, the capital’s residential supply stood at 1,290,000 residential units with an expected delivery of 111,000 additional units by 2023.

In October 2019, the Ministry of Housing launched an initiative to support residential renovations by providing financing for residential units more than 15 years old which is expected to result in higher activity among existing aging stock within the central districts of Riyadh.

Beneficiaries of the Saudi Ministry of Housing’s ‘Sakani’ initiative aimed at increasing the national rate of home ownership, grew by about 14 percent in 2019.

At the end of last year, the capital’s residential supply stood at 1,290,000 residential units with an expected delivery of 111,000 additional units by 2023, CBRE said.

Hotel occupancy is also on the rise in the capital and is expected to receive a further boost from Saudi Arabia hosting the G20 summit this year.

The opening of Qiddiya entertainment giga project which is scheduled for 2023 is also expected to benefit the tourism sector.

There are currently about 17,700 hotel rooms in Riyadh with another 4,500 expected to enter the market by 2023. Hotel occupancy has risen by 5 percent year-on-year, CBRE said.


Oil slumps more than 4% on coronavirus fears

Updated 28 February 2020

Oil slumps more than 4% on coronavirus fears

  • Traders fret about impact of spreading virus on crude demand, particularly from China

LONDON: World oil prices tumbled by more than 4 percent on Thursday, as traders fretted about the impact of spreading coronavirus on crude demand, particularly from key consumer China.

Brent oil for April delivery tanked almost 4.2 percent to $51.20 per barrel, while New York’s WTI crude for the same month dived nearly 5 percent to $46.31.

“Concerns that the virus will prompt a global slowdown, weaker consumer confidence and reduced travel has raised concerns about lower demand, weighing on prices,” said CMC Markets analyst Michael Hewson.

Investors are growing increasingly fearful about the economic impact of the new coronavirus or COVID-19 outbreak. 

The virus continues to spread meanwhile, with Brazil reporting Latin America’s first case, and Denmark, Estonia, Greece, Georgia, Norway and Pakistan following suit.

Around 2,800 people have died in China and more than 80,000 have been infected. There have been more than 50 deaths and 3,600 cases in dozens of other countries, raising fears of a pandemic.

The spread of the virus to large economies including South Korea, Japan and Italy has raised concerns that growth in fuel demand will be limited. 

Consultants Facts Global Energy forecast oil demand would grow by 60,000 barrels per day in 2020, a level it called “practically zero,” due to the outbreak.

US President Donald Trump sought to assure Americans on Wednesday evening that the risk from coronavirus remained “very low,” but global equities resumed their plunge, wiping out more than $3 trillion in value this week alone.

“The negative price impact would intensify if the coronavirus were declared pandemic by the World Health Organization, something that looks imminent,” said PVM Oil Associates analyst Tamas Varga.

“The mood is gloomy and the end of the tunnel is not in sight – there is no light ahead just darkness. Not even a refreshingly positive weekly US oil report was able to lend price support.”

Gasoline stockpiles dropped by 2.7 million barrels in the week to Feb. 21 to 256.4 million, the Energy Information Administration (EIA) said on Wednesday, amid a decline in refinery throughput. Distillate inventories fell by 2.1 million barrels to 138.5 million.

US crude oil stockpiles increased by 452,000 barrels to 443.3 million barrels, the EIA said, which was less than the 2-million-barrel rise analysts had expected.

The crude market is watching for possible deeper output cuts by the Organization of the Petroleum Exporting Countries and its allies including Russia, a group known as OPEC+.

“Oil is in freefall as the magnitude of global quarantine efforts will provide severe demand destruction for the next couple of quarters,” said Edward Moya, senior market analyst at OANDA. 

“Expectations are growing for OPEC+ to deliver deeper production cuts next week.”

OPEC+ plans to meet in Vienna on March 5-6.