The more than 300 apartments in Abdulsalam Almajed’s new compound in Riyadh were sold in just one month for cash, without him even having to advertise.
Of course, it’s no surprise that the real estate market in the world’s largest oil exporter is “hot” as the proceeds from rising energy prices spill over into the economy.
But Almajed, speaking to Bloomberg, stresses that the search for the 1 million riyal ($266,400) houses reflects something else: the social and economic change reshaping the kingdom, which is accelerating.
“There is a change in mindset,” said Almajed, who heads family-owned developer Almajdiah Residence, as some Saudis embrace the more open lifestyle his company appeals to.
While the country’s de facto leader Mohammed bin Salman has consolidated power and increased political repression since succeeding his father, he has also ended or relaxed restrictions on entertainment and how men and women can mix and trying to reduce dependence on oil.
Ten years ago, many landlords wouldn’t even rent to women, who needed a male guardian’s approval for many life decisions. Today, women are entering the workforce in greater numbers and 30% of Almajdiah’s buyers are women, acquiring investment properties or a home of their own.
They help lift an economy transformed by energy markets. As much of the world worries about rising inflation fueled by Russia’s war in Ukraine and potential recessions, oil averaging more than $100 a barrel this year means Saudi Arabia’s economy is the fastest growing in the world. Group of 20.
Gross domestic product expanded 11.8% in the second quarter, when the non-oil economy expanded 5.4%, and is now larger than at the end of 2019, before the pandemic.
State energy company Saudi Aramco reported the biggest quarterly adjusted profit of any listed company worldwide. Billions of dollars are pouring into Saudi coffers and boosting state investment, boosting sentiment in a private sector dependent on government contracts.
Capital spending surged 64% year-on-year from April to June as the kingdom embarks on a building spree that includes shopping malls and parks, as well as grandiose plans for a new city built from scratch and a luxury Red Sea tourism development . Total spending was 16% higher, even though this year’s original budget predicted it would be reduced.
Summers usually send Saudi elites to cooler climes in Europe, but Riyadh’s newest high-end restaurants are packed. At Coya, a Latin American chain, the most popular dinner times – 8:30 to 9 p.m. — are fully closed a month before.
Combined cash withdrawals and point-of-sale transactions, an indicator of consumer activity, have rebounded, rising 9% year-on-year in June after a record high in March. Inflation last month was 2.7%, about a third of the rate in the US or the eurozone.
The finance ministry is trying to break the oil-tracking habit of waste and cuts by channeling incentives through state coffers and into long-term projects such as electric vehicle manufacturing and tourism.
The economy is expected to grow 7.6 percent this year, but growth could fall to 2.5 percent by 2024, according to a Bloomberg survey of economists.
Crude is hovering around $90 a barrel today as global fears of a recession and the possibility of more supply from Iran if its nuclear deal is revived continue to hover over the market.
“If there is another collapse in oil prices, there will be another slowdown in activity,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank. “But a number of positive factors are coming together at this point.”
Almajdiah is aimed at affluent professionals who want open-plan homes with plenty of natural light. Many Saudis previously preferred homes with high walls and tiny windows to maintain privacy. But social openness, along with smaller families and tighter budgets, is changing that.
The construction company’s newest complex is built around communal courtyards and features cafes, gyms and a nursery.
The style echoes luxury homes in Dubai, the regional hub that Prince Mohammed wants to compete with, announcing plans to double Riyadh’s population and attract millions of expatriates.
This is the key to Almajed’s optimism. The more people, the more apartments will be needed, he said.
Source: Capital
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