The real estate markets in Saudi Arabia (KSA) and Dubai are poised for positive growth in 2023, according to the latest report from global consultancy firm Deloitte. With the post-pandemic recovery of the tourism sector being a key indicator within the hospitality industry, the report predicts an increase in hotel occupancy and average daily rates over the past year. This positive outlook is driven by the significant growth of Saudi Arabia's gross domestic product, making it an attractive global destination for investors.
Stefan Burch, partner and head of real estate at Deloitte Middle East, stated, "As global economies fully re-open post pandemic, we predict continued growth in the Saudi Arabian real estate market throughout 2023." He also mentioned that while 2022 saw high demand for commercial office space, 2023 will be dominated by the delivery of high-quality residential-led mixed-use schemes and a continued focus on tourism, leisure, and entertainment projects.
The report also provides a positive outlook for Dubai's real estate market this year. Oliver Morgan, partner and head of development in Deloitte's real estate team in the Middle East, stated, "In Saudi Arabia, there continues to be excess demand across all residential sectors. Riyadh and Dubai continue to be attractive commercial markets as occupiers search for growth away from the Far East and Europe."
Saudi Arabia's Real Estate Performance
Saudi Arabia's GDP grew by 8.6 percent in the third quarter of 2022 and is expected to have continued growth in the coming years. The recovery of the real estate sector is led by increasing tourist demand and government spending on infrastructure projects such as the Riyadh Airport expansion. Occupancy performance in Riyadh reached 76 percent in March, while Jeddah hotels recorded the highest occupancy performance in May at 59 percent. Sale prices of villas and apartments have increased during the first nine months of 2022, and the demand for apartments from Saudi nationals remains strong.
Employment forecasts indicate significant growth in the financial and business services segment in the Kingdom. The total retail sales volume in Saudi Arabia has also increased, with further growth expected in the coming years.
Dubai's Real Estate Performance
Dubai's real estate sector has experienced a post-pandemic recovery, fueled by pent-up demand from travelers and increased spending by residents. However, inflation remains a concern for consumers and is expected to impact sentiments leading into 2023. The occupancy rate for hotels in Dubai has seen a year-on-year increase, while the average daily rate for a hotel room has also risen. Average sale prices and rents for residential properties have shown positive growth as well. Office rents have recovered to pre-pandemic levels, indicating a healthy market.
The total retail sales volume in the UAE has increased, and further growth is anticipated in the coming years, according to the Economist Intelligence Unit.
In conclusion, the real estate markets in Saudi Arabia and Dubai are expected to experience positive growth in 2023. The recovery of the tourism sector, along with government investments in infrastructure projects, is driving this growth. With attractive residential and commercial markets, both countries are attracting investors and occupiers from around the world. As we move towards a post-pandemic world, the real estate sectors in KSA and Dubai are poised for success.
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