As part of Musharaka Capital’s continuous efforts to monitor the real estate sector in Saudi Arabia, analyze growth challenges, and identify investment opportunities, the company organized a workshop titled “Real Estate in Saudi Arabia” last Thursday at the Le Méridien Hotel in Al Khobar.
Key Discussion Points
The workshop focused on:
- The overall direction of the Saudi real estate market and the current slowdown in demand, particularly for land and residential units.
- Legislative changes impacting supply and demand and potential solutions to increase the availability of housing units.
- The Ministry of Housing’s initiatives to address housing shortages.
- Future expectations for the real estate sector and emerging real estate products in the coming years.
- Strategies to support the sector and create investment opportunities for individuals and institutions, enabling them to generate regular returns and capital growth.
Workshop Participation & Outcomes
The event brought together a distinguished group of experts, including bankers, financial analysts, real estate developers, marketers, academics, a representative from the Ministry of Housing, and the Chairman of the Real Estate Committee, alongside market investors. Their active participation led to key findings and recommendations about the future of real estate in the Kingdom. These findings will be published later and will form the basis for a larger workshop in Riyadh in the near future.
Market Trends: “The Real Estate Market is in a Phase of Anticipation and Moving Towards Stability”
The workshop highlighted major factors influencing the real estate sector, with a specific focus on the housing market. Discussions covered:
- Attractive factors and challenges facing the sector.
- A comprehensive SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats).
- The conclusion that the current situation is not a crisis, but rather a phase of anticipation that is expected to gradually stabilize at healthy market levels.
Focus on Income-Generating Properties
Given the current market conditions, investors are shifting towards income-generating real estate. The workshop presented findings from an economic study conducted by Musharaka Capital in collaboration with Jones Lang LaSalle (JLL). This study analyzed investment returns across different real estate segments (residential, commercial, office, industrial, and hospitality) in the Eastern Province, Riyadh, Jeddah, Makkah, and Madinah. The study revealed that the hospitality sector offers the highest returns, driven by the growing demand for hospitality services in Saudi Arabia.
Mortgage Financing Challenges: Increased Loan Burden Reduces Borrowing Capacity by 70%
The participants also discussed mortgage financing challenges. Despite being a crucial solution for homeownership, the Saudi mortgage system has not effectively met citizens’ needs. The discussion included:
- The successful experience of Bahrain’s Housing Bank as a potential model for Saudi Arabia.
- The impact of increasing the borrower’s required contribution to 30%, which has reduced borrowing capacity by 70%—a significant barrier that requires thorough analysis.
“Financial & Investment Firms Should Act as Market Makers”
“Raising Public Awareness About Development Investment Opportunities”
The participants emphasized the need to restructure the real estate sector in a way that:
- Allows developers to focus on technical expertise and innovative projects that compete on a global scale.
- Encourages financial institutions to introduce effective mortgage products that enhance individuals’ and businesses’ ability to finance their real estate projects.
- Encourages financial and investment firms to play a proactive role in real estate investment, create innovative investment opportunities, and attract both individual and institutional investors.
- Raises public awareness about investment opportunities in the real estate sector to ensure widespread benefits, rather than limiting profits to a select few entities.