- Demand expected to grow gradually
- Regional buyers likely to be first
- Wider interest now emerging
Saudi Arabia’s regulations for foreigners who want to buy property in the country have given developers and investors more clarity, but have yet to spur demand, brokers and consultants have said.
Comprehensive information on how and where non-Saudis can buy was published by the Real Estate General Authority last month, almost six months after the law allowing it came into effect.
It was already known that the properties would be limited to designated zones, largely in major cities and giga-project developments. Sellers and developers have been waiting since January for confirmation of where those zones would be.
“It was a very painful six months,” said Elena Boheme, an adviser at property consultancy Coldwell Banker.
“We were not always able to close a transaction because of the lack of clarity,” she said. “Now the legislation is there, people are actually able to make decisions.”
The law is part of Saudi Arabia’s efforts to grow its residential and commercial property market to about $84 billion a year by 2030.
Developers too have awaited confirmation of the rules around foreign ownership before completing projects. Boheme said a number of companies had slowed construction, wanting first to know if they could market new units to foreign buyers.
“Now they need to make a decision,” she said, “where they’re going to push more aggressively and on which project they will either slow down or change strategy.”
The publication of the foreign ownership rules has not yet led to a surge of prospective buyers.
“We expect the impact to be gradual rather than immediate,” said Susan Amawi, who heads the Saudi office of real estate consultancy Knight Frank, “with activity increasing as the framework is implemented and market participants become more familiar with the regulations.”
The new rules do not remove other barriers to investment. Foreign buyers still need to acquaint themselves with the market, according to Knight Frank, while geopolitical tensions have dampened appetite among some overseas investors.
“In the near term, we expect demand to be led by GCC nationals, expatriate residents and regional investors who are already familiar with the Saudi market,” said Amawi.
“Over time, greater regulatory clarity and increased market awareness should support broader international participation.”
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According to Ryan Dougan, a real estate adviser for Riyadh wealth manager Bayut Wealth, demand for Saudi property remains largely limited to those “with some connection to the region”.
Of the institutional investors and family offices he advises, almost all of those looking to get a foothold in Saudi Arabia have a familial or business tie to the country.
Many of those that do not are looking to invest in hospitality projects, part of Saudi Arabia’s drive to increase hotel rooms by 362,000 by 2030.
Dougan has not seen demand increase since the rules were published. “We’re very early in the overall cycle,” he said. “It is going to be a gradual increase.”
He added, however, that the detailed regulations had “put Saudi property on the radar of a lot of people who might not have been thinking about it”.