Economic outlook, demographics to drive Saudi real estate growth 

(MENAFN - Arab News) Saudi GDP growth and attractive demographic landscape will remain strong drivers for development of real estate sector in the Kingdom compared to its GCC neighbors, according to a report by Kuwait-based Global Investment House (Global).

The national Saudi population represents 73 percent of the aggregate versus only 32 percent in Kuwait and 18 percent in the UAE implying a more sustainable organic demand for housing over the long term.

Almost 60 percent of the Saudi population is below the age of 30 compared to 54 percent in Kuwait and 46 percent in the UAE, the report said.

Saudi Arabia has the most balanced gender structure with expatriate males representing only 18 percent of total population as opposed to 44 percent in Kuwait and 69 percent in the UAE.

Although the Kingdom witnessed the slowest five-year population CAGR amongst the three countries registering 2.1 percent versus 3.2 percent in Kuwait and 6.8 percent in the UAE, sustainability remains a key advantage of the Saudi demographic profile given its organic nature and the ability to maintain a growth trend, the report said.

Unlike the UAE which saw its population decrease by 4.4 percent in 2009 and Kuwait by 0.3 percent, the Saudi population saw growth in both its expatriate and national populations between 2005 and 2009.

The Saudi economy posts more vigorous growth figures witnessed in 2008-2011 an average GDP growth of 3.9 percent as opposed to 2.4 percent for Kuwait and 1.6 percent for the UAE. Saudi Arabia also maintains a more robust M2 growth that averaged at 13 percent in 2011 versus 6 percent for Kuwait and 10 percent for the UAE.

Quarterly inflation in the UAE hovers between negative 0.5 percent to a positive 2 percent (3Q11: 0.1 percent YoY) with the housing component strongly heading down reflecting the pressures on the sector between 2009 and 2011.

Saudi and Kuwait report healthier inflation figures at 5 percent and 5.6 percent, respectively on annual basis in 3Q11, according to the report.

The favorable Saudi economic landscape is more encouraging for the real estate sector, the report says.

Direct government spending and the REDF housing loans will continue to generate market activity in the sector in the short to medium term.

Major constraints to the development of the Saudi undersupplied sector are related to the structural and legislative inefficiencies along with affordability limitations.

According to the report, Saudi Arabia has consistently topped the region in terms of FDI inflows with the majority of these inflows being injected in the petrochemicals sector.

Saudi Arabia is also top ranked, region-wise, in terms of ease of doing business.

The Saudi ranking has been improving consistently moving from a global ranking of 23rd in 2007 to the 10th in 2011 reflecting a more business friendly environment.

The UAE and Saudi Arabia, accordingly, are better positioned to attract new business, which will have a positive impact on the oversupplied office segment in all three countries and will, in turn, create more demand for housing and increase consumer spending, a trend we see materializing sooner in Saudi Arabia given its more stable economic outlook, the report said.