Saudi Arabia | Targets Economy Diversification
The Kingdom of Saudi Arabia is the Arabian’s Peninsula’s biggest country. It has a population of 34.81 million as of 2020 which is higher than 2019 (34.14 million).
The Kingdom’s population is relatively young with 54.40% of the population being Male and 42.60% being Female.
According to OPEC, Saudi Arabia owns around 22% of the world’s oil reserves which is estimated to be around 266 billion barrels. It is the biggest exporter of petroleum liquids in the world and its oil industry accounts for almost half of its GDP.
Saudi Arabia in 2019 recorded GDP value was $792.97 billion. In 2020, thought the country’s GDP is expected to have a downward trend based on the pandemic’s effects on economy, prices, and trade.
According to Trading Economics, Saudi Arabia’s GDP is going to reach $745 billion which is $47.97 billion less than the country’s GDP value in 2019. Also, projections say that Saudi Arabia’s GDP will potentially revive and reach the value of $790 billion in 2021 and $820 billion in 2022.
The unemployment rate of the Kingdom of Saudi Arabia reached 9% in 2020’s second quarter which is a significant upturn from the first quarter of 2020 (5.70%).
The country’s unemployment rate is predicted to be higher, approximately 7.50%, by the end of the third quarter of 2020. However, the predictions of Trading Economics state that the unemployment rate is expected to be around 5.60% in 2021 and slightly lower in 2022 reaching 5.50%.
The Kingdom’s real estate market has a significant contribution to the GDP growth of the Kingdom and region’s developing capital markets.
Despite the Covid-19 pandemic consequences, the Kingdom continues with its ambitious plans of encouraging property sales and rentals. As a matter of a fact, the government of Saudi Arabia aims to encourage the non-oil sectors, in order to diversify and develop even more the country’s economy while creating jobs for millions of Saudis.
The decision of the government to diversify the economy was based on the drop in oil demand and prices.
In addition, the Kingdom of Saudi Arabia agreed on working towards achieving their ambitious 2030 Vision, which entails the development of many areas in the country including but not limited to: entertainment and culture, sports, education, environmental sustainability, real estate and tourism sector.
According to Knight Frank’s 2020 report on Saudi Arabia’s real estate market, the residential market in the main cities of Riyadh, Jeddah, and Dammam Metropolitan Area (DMA) has seen a significant upturn in its sales prices. Moreover, Knight Frank’s 2020 report figures states that in the fourth quarter of 2019, Riyadh experienced a 3.6% increase in its residential apartment sale prices and a 6.6% increase in its residential villa sale prices.
Furthermore, Jeddah’s residential apartment prices increased by 3.3% in the last year, whereas villa sales price by 1.8% Dammam Metropolitan Area (DMA) apartment sale prices increased by 2.8% and villa sales prices by 1.7%.
Additionally, according to the 2020 report of Knight’s Frank, Riyadh had the biggest growth in the value of residential transactions (36%) and Jeddah had the biggest growth in volume of residential transactions (9%). However, Dammam Metropolitan Area (DMA) had the lowest growth percentage in volume of residential transactions estimated at -1%.
The increase of volume and value of the residential transactions is due to the government’s introduction of various schemes to encourage the country’s real estate market.
For example, the Kingdom’s government continues the Sakani program which is responsible to allocate residential products (housing units, residential lots, funds) across the Kingdom.
The specific program aims at helping more Saudis to own a property with the goal by 2030, 70% of Saudis to be the owners of a property.
Hence, the country’s government supports the collaboration between the Ministry of Housing and the Private Sector Program (Shrakat). The aforementioned collaboration is in place to offer housing solutions and products to the country’s citizens as per their needs, whilst taking into account their financial situation.
It is important to mention that expatriates are allowed to purchase property in a number of areas in Saudi Arabia, with the exception of Mecca and Medina where foreign ownership is only allowed through inheritance.
The government of Saudi Arabia is committed to diversify its economy and ensure the development of the country’s non-oil sectors, whilst providing a prosperous and attractive environment for the residents of Saudi Arabia and foreign investors.
Therefore, the government has introduced various programs to boost the real estate market and there was some real growth from December 2018 to December 2019.
Moreover, the government of Saudi Arabia seems to be very determined in developing the real estate market even more, not only in the short by in the long term as well, whilst maintaining its Arabic and Islamic identity.
Beside that Saudi Arabi’s government focuses on developing the country’s hospitality and tourism industries, through a number of actions and developments, such as easing the regulations for obtaining a tourism visa, provide the options to foreigners to apply for e-visas and visitors from certain countries to be eligible for visas on arrival.
Further to this, the government intends to develop its leisure and entertainment facilities and complete projects that are going to make Saudi Arabia’s tourist product more competitive worldwide. Such projects include the Amaala, Al Ula, The Red Sea Project and many more.
The future of Saudi Arabia is very promising; therefore, an investment now will definitely provide a return in the long term. Its focus on achieving its Vision 2030 is the proof of that statement since the country is changing and putting a lot of effort in making it more attractive to potential investors, while improving the country’s socioeconomical environment.