Details

Prices, incentive packages, banking sector leading property sector to more growth, attractiveness

Saudi Arabia, Kuwait recording highest property sales in Gulf region

Al Mazaya: Worst-case scenarios already gone, growth prospects ensuing

The ongoing incentive packages and transformational economic plans adopted by the Gulf region are aimed at building resilient economies with robust financial bases capable of dealing with challenges during the current and next year.

The real estate sector enjoys the largest share of these recovery plans during the current year, with the banking sector playing a fundamental role in maintaining the much needed financial and economic momentum to ensure sustainable growth. The energy and petrochemical sectors sometimes contribute to achieving economic balance. However, at other times the two sectors become part of the problem due to the challenges they face in terms of operating performance and intense competition in global markets.

Real Estate Loans

The weekly report of Al Mazaya Holding Company indicated that despite the pressures and prevailing uncertainty in 2019, the volume of retail and corporate real estate loans recorded more growth throughout the year, with retail loans in the Kingdom of Saudi Arabia accounting 64.2% of total loans provided during Q2 this year, equivalent to SAR180.7 billion, compared to SAR138.6 billion during the same period last year.

The report highlighted industry data showing an increase in the volume of real estate loans in the United Arab Emirates to AED 52.5 billion during the first four months of this year, with mortgages hitting AED 48.6 billion. The Central Bank of the UAE raised financing cap for the real estate sector to 30% of total risk-weighted assets compared to 20% previously, which reflects the new trends to support and revitalise the real estate sector and maintain its attractiveness.

Residential Sales

Al Mazaya report added that the indicators of the real estate markets came better than expected, as sales recorded good recovery paths until the end of the third quarter of this year, with the total value of transactions conducted having increased by 15%, a total of $68.8 billion, compared to $57.7 billion in the same period of 2018.

The report noted that the markets of Saudi Arabia and Kuwait recorded the highest recovery and improvement levels in terms of sales, given that attractive prices play a significant role in stimulating sales. Kuwait saw continued demand for office spaces, while the Saudi residential real estate market continues to perform well in terms of the size and value of executed deals, with the entertainment sector enjoying an appeal in all markets.

Promotion & Marketing

Al Mazaya report drew attention to the efforts made to successfully develop the necessary tools for promoting and marketing real estate products at the beginning of the year 2019, despite local, regional and global financial and economic pressures.

The report expects that real estate developers will continue their efforts to develop more tools to attract new investors and buyers during the year 2020, considering that it is time to re-evaluate supply in the real estate markets and stop launching similar and repeated projects while working relentlessly to introduce innovation-driven projects and stimulate demand.

Stability & Balance

On the other hand, the report pointed out that the stability of global oil markets during 2019 has contributed directly to raising investment liquidity in property markets thanks to the launch of a large number of development projects. Average prices hovered around $64 per barrel under commercial pressures and tensions that affected demand growth, the report clarified.

Oil demand indicators conformed to previous expectations despite the fluctuations the sector went through, ranging between 0.90 and 1.3 million barrels per day for the current year, and between 0.80 and 1.5 million barrels in the year 2020, which means more liquidity and stability in general economic performance, which in turn will stimulate other sectors and maintain the pace of launching medium and long-term projects.

Banking Sector

Al Mazaya believes that the banking sector has become more prepared and able to provide more loans to all sectors, which contributes to raising the values of liquidity required for investment in all areas and activities. The next few months will carry more positive signs for property markets, as real demand is increasing significantly among end-users and potential investors, especially as prices continue to reach more attractive levels, thereby encouraging more profitability prospects to ensue.

The report suggested that the worst-case scenarios are already gone and that investment opportunities are set to constantly increase during the coming period, due to government support and the recent decisions that have been taken and those which will be adopted over the next year to stimulate economic growth and help various economic sectors overcome existing challenges and obstacles.