The real estate sector in Saudi Arabia is on the verge of a significant upturn as a survey reveals that high-net-worth individuals (HNWIs) from the Muslim community are looking to pour approximately $2 billion into properties in the sacred cities of Makkah and Madinah.
A renowned global property consultancy’s recent research, featured in their inaugural ‘Destination Saudi’ report, highlighted the intense interest of 92% of HNWIs interviewed in branded residential units within these revered cities.
“The holy cities of Makkah and Madinah represent some of the most sought-after Saudi locations for property ownership among global HNWIs. The chance to live not only in the Kingdom but in one of the holy cities is itself a key demand driver,” stated Vera Zabelina, a research analyst at the consultancy.
Anticipation is building within the Kingdom’s real estate market as it prepares for regulatory changes, particularly the debut of new premium residency visas that are linked to property ownership.
These regulatory shifts aim to attract international investments and are in line with Vision 2030, the Kingdom’s strategic plan to diversify its economy away from oil dependency and promote high-quality housing for its citizens.
Nevertheless, the report suggests that the effects of these changes might unfold gradually due to the prerequisites of owning properties valued at a minimum of SR4 million ($1.06 million), outright ownership, and an annual visa renewal fee of SR100,000.
The survey, including responses from nearly 506 HNWIs across nine countries with significant Muslim populations and personal net worth exceeding $500,000, showed a robust 82 percent interest in Saudi real estate ownership.
Investment appeal and cultural-religious significance are the primary motivators driving the demand, with 60 percent of respondents recognizing Saudi Arabia as a promising investment landscape and 45 percent influenced by cultural and religious ties.
Ownership in Makkah and Madinah, key destinations for Muslims, has historically faced legal barriers. Despite the new premium residency visa, outright ownership remains off the table, with a 99-year leasehold being the current standard.
“The prospect of a 99-year leasehold title will undoubtedly fuel a wave of new purchasing demand from Muslim majority nations,” noted Mohamad Itani, partner at the consultancy.
Interest in residential property in Saudi Arabia remains high, with 84 percent of prospective buyers focused on the holy cities. Among these, 40 percent are inclined towards Makkah, while Madinah attracts 19 percent, and 26 percent are open to either city.
Apart from investment potential, those eyeing Madinah are also motivated by work and business prospects. The survey also disclosed an average budget of $4.7 million per respondent for residential properties in the holy cities, totaling a staggering $2 billion in potential investments.
The consultancy’s analysis indicates a correlation between personal wealth and the preference for cash payments in property transactions, ranging from 31 percent among those with less than $500,000 net worth to 78 percent among those exceeding $3 million.
The appetite for luxury and branded residences is evident, with 92 percent of HNWI Muslim respondents expressing interest in acquiring such properties in the holy cities, despite their price surpassing current apartment rates.
However, the scarcity of luxury housing, especially in Makkah, is evident. With only 1.5-2 percent of the 660,000 units planned nationwide, this indicates significant potential for the luxury real estate market in the holy cities to expand.
“Branded residences represent a significant area of opportunity for developers across the Kingdom, particularly given the high budgets among domestic branded residential purchasers… The international wealthy share this sentiment, yet limitations in branded residence options, local financing, and partial ownership options remain obstacles,” added Faisal Durrani, another partner at the consultancy.
Branded residences, a rapidly growing segment in the Middle East’s real estate market, resonate with global trends, with wealthy buyers seeking exclusivity. Saudi Arabia, now claiming a 10 percent share of this market, is set to witness a 120 percent increase in such properties by 2030, reflecting confidence in the market’s potential for growth.
These properties, offering distinguished services and amenities, are attracting investors poised for asset appreciation and the promise of an exclusive community.