RIYADH: Saudi Arabia's real estate market is up for positive growth in 2023, with the post-pandemic recovery of the tourism sector being the key indicator within the hospitality sector, revealed the latest report from global consultancy firm Deloitte.
Reflecting the upbeat mood in the real estate market, Deloitte’s ninth annual Middle East Real Estate Predictions 2023 report predicts an increase in hotel occupancy and average daily rates over the past year.
The report noted that the significant growth of Saudi Arabia’s gross domestic product is making it among the most attractive global destinations for investors.
“As global economies fully re-open post pandemic, we predict continued growth in the Saudi Arabian real estate market throughout 2023,” said Stefan Burch, partner and head of real estate at Deloitte Middle East.
He added: “While 2022 saw record levels of demand for commercial office space as a result of ‘Program HQ’, 2023 looks set to be dominated by the delivery of high-quality residential-led mixed-use schemes and a continued focus on tourism, leisure, and entertainment projects.”
Among the key findings, the report also provides a positive outlook for Dubai’s real estate market this year.
Oliver Morgan, partner and head of development in Deloitte’s real estate team in the Middle East, added: “In Saudi Arabia, there continues to be excess demand across all residential sectors. Riyadh and Dubai continue to be attractive commercial markets as occupiers search for growth away from the Far East and Europe.”
Saudi Arabia’s real estate performance
Saudi Arabia’s GDP grew by 8.6 percent in the third quarter of 2022. It is expected to have grown by 8.3 percent in the fourth quarter of 2022, before moderating to 3.7 percent and 2.3 percent in 2023 and 2024 respectively, according to the World Bank.
The post-COVID recovery of the real estate sector is led by increasing tourist demand and government spending on infrastructure projects such as the Riyadh Airport expansion.
The first three months of the year were the strongest for occupancy performance in Riyadh, reaching 76 percent in March. Meanwhile, Jeddah hotels recorded the highest occupancy performance in May at 59 percent.
Sale prices of villas and apartments have increased during the first nine months of 2022 in comparison to 2021, and the demand for apartments from Saudi nationals has remained strong.
Employment forecasts from Oxford Economics indicate the financial and business services segment registered year-on-year growth of 12 percent in the Kingdom.
The Economist Intelligence Unit estimates that the total retail sales volume in the Kingdom has increased by approximately 4 percent in 2022, with sales expected to increase by 2 percent a year on average between 2023 and 2026.
Dubai’s real estate performance
Pent-up demand from travelers and increased spending by residents led to the post-pandemic recovery of the real estate sector in Dubai, noted the report, but adding that inflation remains a concern for consumers and is expected to impact sentiments leading into 2023.
The year-to-date November 2022 occupancy for Dubai averaged 72 percent, compared to 63 percent for the same period in 2021, while the average daily rate for a hotel room over this period has increased by 22 percent year-on-year to 674 dirhams ($183.5).
The report added that average sale prices for residential properties in Dubai increased by approximately 10 percent between 2021 and 2022. Average rents also increased by approximately 21 percent over the same period.
Office rents have recovered to pre-pandemic levels registering an increase of 12 percent year-to-date in September 2022 over the same period last year.
The EIU estimates that the total UAE retail sales volume has increased by approximately 4.2 percent in 2022, with sales expected to increase by 3.9 percent on average between 2023 and 2026.
