Increased government spending and giga-projects provide investment catalyst in Saudi Arabia

Posted on 8th February 2019

Increased government spending and giga-projects provide investment catalyst in Saudi Arabia
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According to *Tradearabia news report, increased government spending and progress on giga-project developments such as the  King Salman Energy Park (Spark) provide a catalyst for future investment opportunities in Saudi Arabia, according to JLL, a leading real estate investment and advisory firm.

With stronger oil revenues and progress on new social reforms, the kingdom's GDP growth levels are expected to register 2.4 per cent in 2018 according to Oxford Economics, up from -0.9 per cent in 2017, stated JLL in its report.

The '2018 Year in Review' provided an overview of the Saudi real estate’s market performance across the residential, office, retail and hotel sectors, in light of macro-economic factors and new government initiatives affecting the market’s future outlook.

The year 2019 is expected to witness ongoing activity on the back of the kingdom’s largest-ever expansionary budget - SR1 trillion ($266 billion) in spending - and commitment to driving economic growth in line with Vision 2030’s objectives, it stated.

With conditions remaining soft across most sectors of the market in 2018, the hospitality and entertainment industries witnessed several major development announcements, said JLL in its report.

These included the launch of Al Qiddiya in Riyadh and Amaala, the luxury wellness destination forming part of a giga-projects investment portfolio launched by The Public Investment Fund (PIF), it added.

"The government’s continued focus on strengthening the business environment and attracting foreign investment should have a positive impact on the real estate sector in the long run," remarked Dana Salbak, an associate at JLL Mena.

"These milestone projects are key drivers of Saudi non-oil economic growth and are expected to trigger other large scale real estate development activity," said Salbak.

"In addition, the wave of development across the Kingdom and other reforms promoting Saudization are expected to create a surge of job opportunities in the long run," she added.

According to JLL, the entertainment sector saw the return of cinemas sparking development opportunities and significant retail opportunities in the field of ‘shoppertainment.’

While economic reforms have weighed on the purchasing power of residents, namely VAT, subsidy cuts and expatriate levy, the retail sector overall is set to benefit from the long term growth potential presented by reformative changes, said the top property expert.

The inauguration of Spark last year was another milestone project expected to fuel demand for commercial and industrial real estate in the Eastern Province.

With an expected GDP contribution of SR22 billion by 2035 the park’s unique infrastructure is likely to act as a catalyst for attracting foreign investment and private sector participation.

Saudi Arabia’s potential as a global transport hub has led to the development of major infrastructure projects focused on connecting cities, in turn providing private and foreign investment opportunities.

The year 2018 saw significant progress with the inauguration of the 448-km Al Haramain High Speed Railway and the soft opening of the new King Abdulaziz International Airport in Jeddah, said Thierry Delvaux, the CEO of JLL Middle East and Africa (MEA).

“The market dynamics in Saudi Arabia have seen a major shift in the last year, with significant government investment and new reforms expected to have a positive long term impact on the Kingdom’s real estate market,” he added.

*News source: http://tradearabia.com/news/CO...

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