NEOM: The Prime Real Estate Choice for Expat Investors in Saudi Arabia | Kanebridge News
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NEOM: The Prime Real Estate Choice for Expat Investors in Saudi Arabia

Expatriates in Saudi Arabia have set their sights on NEOM, making it their top choice for real estate investments.

Thu, Apr 4, 2024 4:01pmGrey Clock 2 min

According to a report by Knight Frank, Expatriates in Saudi Arabia have a collective investment budget of approximately $863 million for the real estate sector. NEOM stands out as the most sought-after destination, with 29% of Saudi-based expats expressing a desire to purchase homes there, highlighting its status as the preferred giga project.

 

Investment Preferences and Budget Insights

The report, titled “Destination Saudi,” reveals that following NEOM, Jeddah Central and King Salman Park are the next popular choices among expats, with preferences standing at 15% and 8% respectively. The survey conducted by Knight Frank involved 241 expatriates residing in Saudi Arabia, aiming to delve into their investment behaviors and preferences. A significant portion of these expats, 56%, have lived in the Kingdom for over a decade, and 76% are employed in the private sector.

Specific interests within NEOM include The Line, Sindalah Island, and Sharma Valley, attracting 42%, 19%, and 10% of potential investors respectively. Faisal Durrani, Knight Frank MENA‘s Head of Research, emphasizes the global intrigue sparked by Saudi Arabia’s ambitious giga projects, with NEOM leading as the essence of futuristic urban development.

 

Faisal Durrani, Partner and Head of Research at Knight Frank MENA

Financial Preparedness and Young Investors

The study found that 87% of expatriates are willing to invest up to $933,000, with a notable 32% considering investments below $200,000. This poses a challenge for developers, given the expectation that most properties in these projects will exceed the $1 million mark. However, when faced with this reality, 41% of expats remained interested in purchasing within giga projects, showing a readiness to adjust their budgets.

The willingness to invest in preferred giga projects is strong, with 72% of expatriates likely to make a purchase. The average investment budget for a home in a giga project stands at $720,000, significantly higher than the budget for properties elsewhere in the Kingdom. Interestingly, millennial expats, those under 35, are showing the highest investment potential, with budgets averaging $1.1 million.

Expatriate Spending Power and Premiums

Harmen de Jong, Knight Frank MENA’s Head of Consulting, highlights the substantial spending power of Saudi expats, estimated at $152 million. Extrapolated across Riyadh’s professional workforce, this indicates a potential investment capacity of $863 million. Expatriates are also willing to pay a premium for living in giga projects, with 32% prepared to spend 2.5-5% more than market rates, and the average premium willingness standing at 5.7%.

High-income expatriates, particularly those earning over $10,700 monthly, are notably ready to pay a premium of 5-7.5% for properties in giga projects. Mohamad Itani, a partner at Knight Frank, points out the enthusiasm among high earners for giga project homes, emphasizing the importance of distinctive community features and amenities to attract these investors.



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UAE Residential Market Review Shows Strong Growth and Record Transactions in Q1 2024

The total transaction volume in Abu Dhabi for the first quarter of the year reached 2,795.

Thu, May 16, 2024 4 min

The CBRE Middle East, a global leader in commercial real estate services and investments, released its latest edition of the UAE Residential Market Review for the first quarter of 2024.

Abu Dhabi Market Overview

During the first quarter of the year, the total volume of transactions in Abu Dhabi stood at 2,795, registering a 22.6% increase compared to the year prior. This increase has been underpinned by an 18.1% rise in off-plan sales and a 34.5% rise in secondary market sales. In the year to Q1 2024, Abu Dhabi’s average apartment and villa prices increased by 4.3% and 2.3%, respectively.

Abu Dhabi’s rental market witnessed a total of 46,130 residential rental contracts in Q1 2024, registering a decline of 10.9% from the year prior. This has been due to a 15.5% decline in the number of renewed rental contracts registered and a 2.4% drop in new rental registrations over the same period. In the year to Q1 2024, average apartment and villa rents have increased by 4.5% and 1.1%, respectively. On the supply front, only 80 units have been delivered in Abu Dhabi in the first three months of the year, with all of this new stock being in Al Raha Beach. An additional 8,660 units are expected to be completed by year-end with 55.8% of this scheduled stock located in Yas Island, Al Sowwah, and Al Shamkha.

Dubai Market Insights

In Dubai, price growth has continued to accelerate during the first quarter of 2024, with average prices increasing by 20.7% in the year to March 2024. Throughout this period, average apartment and villa prices increased by 20.4% and 22.1%, respectively. Although headline average sales rates are still marginally below the 2014 highs by 0.1%, several prominent residential neighbourhoods have already surpassed their 2014 figures.

As of March 2024, average apartment prices stood at AED 1,486 per square foot, and average villa prices reached AED 1,776 per square foot. Average villa sales rates are currently above their 2014 baseline by 22.9%. Rental growth has also gained momentum in 2024, after a period of moderation in 2023. In March 2024, average residential rents registered a year-on-year increase of 21.2%, up from the 20.4% growth registered a month earlier. Over this period, average apartment and villa rental rates grew by 22.1% and 14.5%, respectively. Data from the Dubai Land Department revealed that, in the year to date to March 2024, the total number of rental registrations stood at 159,941, marking an increase of 5.8% from the previous year. As for supply, a total of 6,526 units were delivered in the first quarter of the year, with 59.7% of this supply being located in Meydan One, Jumeirah Village Circle, and Al Furjan. A further 46,086 are expected to be handed over the remainder of the year. However, given historic materialisation rates, the report expects that a limited portion of this upcoming stock will come online as planned.

Record-Breaking Transactions

March 2024 witnessed another record in Dubai’s residential market, with transaction volumes reaching the highest monthly figure on record, marking a year-on-year growth of 13.2%. Throughout this period, off-plan sales and secondary market sales increased by 20.2%, and secondary market sales increased by 2.2%.

In the first quarter of 2024, Dubai’s total transaction volumes reached 35,310. This is the highest total ever recorded in the first quarter of the year, marking an increase of 20.5% from the year prior. Over this period, off-plan transactions recorded an increase of 23.9%, and secondary market transactions rose by 15.2%.

However, in Q1 2024, the total number of sales transactions within the prime market segment registered a decline of 2.1% compared to the year prior. Throughout this period, super-prime transactions recorded a drop of 16.5% year-on-year to stand at a total of 227. These declines witnessed in both markets have been largely underpinned by significant declines in off-plan sales largely attributable to the high levels of demand for off-plan properties and the limited level of upcoming supply. In terms of performance, in the first quarter of 2024, average prime prices registered a year-on-year increase of 16.0%, standing at an average of AED 4,661 per square foot, and average super-prime prices grew by 14.8% over this period, reaching AED 4,978 per square foot.

Taimur Khan, CBRE’s Head of Research MENA in Dubai

Future Projections 

Looking ahead, CBRE expects Dubai’s residential sales market to maintain its upward trajectory. Prices in both the apartment and villa segments of the market will continue to grow, however, not at the same pace. On the rental front, we forecast that residential rents will continue to increase. That being said, the rate of growth will likely moderate.

Taimur Khan, CBRE’s Head of Research MENA in Dubai, comments: “The UAE’s residential market started the year on a relatively strong note, where the elevated demand levels continue to drive performance. The strong levels of activity and high absorption levels, which have reduced available supply, will continue to support price growth in both Abu Dhabi and Dubai over the remainder of the year. In terms of rental growth, we expect that rental rates in Abu Dhabi will continue to rise, with prime areas set to outperform the market. In Dubai, residential rents will continue to increase; however, not at the same rate that we have been seeing to date, and we expect that the rate of change will diminish in the second half of the year.”

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