Saudi Arabia is now preparing itself for the post-oil era so that the government invests larger funds on social and welfare infrastructure, such as real estate and property. Saudi Arabia’s real estate market consists of several property types, for example, houses, villas, apartments, and residential buildings.
Currently, this particular market is suffering from slow growth due to the economic repercussions caused by covid-19 pandemic. Will this condition bring new opportunities for the global investors to enter the real estate market in this country?
Saudi Arabia Real Estate Market: the Overview
The pandemic of covid-19 has caused economic downfall to most countries in the world. Arab Saudi, one of the wealthiest countries in the world, also suffers from the negative impact of this pandemic. It is estimated that there will be a deficit of 12% this year.
One of the sectors that was hit by this downfall is the real estate and property sector. This is the overview of the Saudi Arabia real estate market.
- Real Estate and Property Growth
The growth of the residential sector increased 2.03% during the year to Q3 2020. However, when this index is adjusted for inflation, property prices actually declined by 3.51% y-o-y in Q3 2020.
- Tax Relaxation
The Saudi Arabian government was trying to improve its finances by triple the value added tax or VAT to 15%. However, the government then decided to give a tax relaxation for first-time homebuyers who purchase properties worth SAR 850.000 or less.
Later on, the government applied this policy to all property deals so that property buyers get 15% VAT exemption and only need to pay 5% tax. Moreover, the tax exemption is also given to first-time homebuyers who purchase properties worth SAR 1 million or less.
- Foreign Ownership of Property
The Kingdom of Saudi Arabia allows foreign citizens to own real estate in this country. However, a prior approval is required and foreign ownership is forbidden in Mecca and Medina.
Foreign investors are also allowed to have buildings or real estate projects (a prior approval is required) worth more than SAR 30 million, including construction costs and land. Therefore, foreign investors have an opportunity to enter Saudi Arabia real estate market with ease.
Entering the Real Estate Industry of Saudi Arabia
Currently, the government is trying to improve home ownership by Saudi Arabia nationals. It builds affordable houses and offers more financing options for first-time homebuyers. These policies, the VAT exemption, and foreign ownership open more opportunities for foreign investors.
However, foreign investors need to consult their business plans to a market research company, such as Market Entry Strategy Saudi Arabia before entering the market. This company offers market analysis and strategy to help the investors gaining immense profit in the real estate market of Saudi Arabia.
The company also offers business insights and data on the market competition, consumers purchasing habits, and other related data to the real estate market of the country. Therefore, foreign investors will have more chances to grow and develop in this market.
The real estate market of Saudi Arabia is suffering from slow growth due to the fall of oil price and economic repercussions caused by the covid-19 pandemic. However, it is estimated that this sector will grow positively in the future because the government is trying to boost the home ownership of the locals.